Christopher Dodd

Mr. DODD

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 I ask unanimous consent that the order for the quorum call be rescinded.

Mr. DODD. Mr. President, I ask unanimous consent that we temporarily lay aside the Landrieu-Isakson amendment.

Mr. DODD. First, let me acknowledge the contributions of Senator Crapo to the Banking Committee efforts. While not endorsing the bill as it presently reads, he has been a valuable member of the committee for many years. I deeply appreciate his input. His ideas are always tremendously constructive in any debate we have. I thank him for that. I have asked my staff to meet with his staff to try to clear up some things. I would like to be in a position of where we can accept the amendment. I am not trying to prejudice one over the other. We would like to keep some risk retention or good underwriting standards so the choice is there. We are not trying to impose both. I know the staffs are talking. On page 2 of the amendment, beginning around line 18, paragraph (I), beginning ``retention of'' and then it lists three paragraphs and possibly a fourth. We are looking for some clarity on the meaning of ``the value of securities sold to investors or the interest of the seller in revolving assets.'' On those two, we particularly need some clarity on what that means. It seems vague to us as to how that would apply. Rather than rush this along, we would like to take a few minutes and see if we can come to some resolution of that and possibly accept it. Senator Landrieu will have to come over. It is her amendment we are amending. We will see if we can reach accommodation and adopt it, if possible. Let's take a few minutes and look at how we might work on this together. If we can come to a conclusion, I will be prepared to support the Senator's amendment. I am not trying to distinguish real estate from commercial. I realize there are some differences. They are different transactions, obviously, but the point is the same. We would like to make sure the securitization, on which the Senator is absolutely correct--I think these words become pejorative. When done well, it expands opportunities tremendously in terms of creating additional liquidity, making resources more available for more loans, home sales, and the like, providing there are sound underwriting principles involved so we are not getting ourselves into trouble again. That is why we have had an insistence on strong underwriting standards and risk retention, the old skin in the game. That is what risk retention means. If you have equity in it, you will be careful about what goes out the door and becomes securitized. I am not interested in having risk retention if, in fact, we have good standards that apply and we don't end up where we were 2 years ago, discovering a lot of these instruments that got securitized ended up being worthless, even worse than worthless, in some cases, because of the problems they caused. I respect where my colleague is coming from. If we can spend a few minutes and try and resolve this, then maybe we can come to some agreement. That would be my hope.

Mr. DODD. Mr. President, I 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, let me begin by expressing my gratitude to Senator Lincoln of Arkansas and Senator Chambliss of Georgia and members of their committee for their tremendous work. In fact, there is some overlap in membership. I think a couple members of the Banking Committee are also members of the Agriculture Committee. I know how hard they have worked on what is such a critically important piece of this legislation. It is probably an area with which a lot of people are not terribly familiar. A lot of the language we use in describing this area of the bill sounds pretty foreign to a lot of people, but it is terribly important we get this right, for reasons I will try to briefly explain this afternoon. For many Americans who aren't necessarily experts on our financial system, this is one of the most confusing parts of our work, but it is also incredibly important in terms of our overall reform of the financial system. I am sure this has already been described by the Senator from Arkansas and the Senator from Georgia, so this may be somewhat repetitive. People ask me: What is a derivative? It is a fancy word, ``derivative.'' Really, what it amounts to, in simple terms that most Americans can understand is, it is a bet. It is a wager, in a sense--an important wager but nonetheless a wager. It is a wager placed on the future value of something, either as a future protection against change in the value of that instrument or a way to make some money off of it. It is a legitimate operation, provided it is done properly. There is nothing wrong with them. In fact, they play a very important role. If used responsibly as a way to hedge a commercial risk, they are tremendously important. Many of us have heard about, for instance, the candymakers. We hear this example all the time. Candymakers are able to keep their costs stable as a production company through the use of derivatives. If you are an end user, as they are called, and your costs depend upon future prices of a commodity such as sugar or other additives, that is a way to stabilize those costs and provide some certainty to that particular company; or it can be the future direction of interest rates which can have a huge impact on the cost of a product and the success and well- being of a company as well. Derivatives can serve as a form of insurance against an unexpected spike in either the price of a product or interest rates. But the problem is this: As companies have come up with new and innovative ways to use derivatives--and they have--much of this activity has taken place in the shadow economy where there is little sunlight at all to expose what these instruments are and how they affect the overall economy of our country. They operate outside the supervision of any regulator, and that is where the problems arise. Not in derivatives themselves, but how they are perceived, how they are seen. That is how one night in September of 2008, I found myself, along with several other Members of this body, in a room not far from where this Chamber exists listening to the Chairman of the Federal Reserve Bank, Mr. Benjamin Bernanke, and Treasury Secretary Hank Paulson as they explained what had happened to AIG, the largest insurance company in the world, and what would need to happen to fix the problems posed by the activities in which the company was involved. Just as some international corporations create shell companies in the Cayman Islands to avoid tax responsibilities, AIG created a subsidiary called AIG Financial Products to sell complex and risky products. It was thus able to take advantage of the fact that there was no regulatory requirement that AIG hold enough capital to cover its exposure to these products. Meanwhile, because AIG was rated AAA by the rating agencies as a company, their counterparties didn't demand much in the way of collateral or margin. Essentially, AIG guaranteed other people's bets; that is, these counterparties--Goldman Sachs, Societe Generale, a French bank--without having the money to pay them if those bets failed. AIG was able to do so without anyone knowing how many of these guarantees they had actually sold. As we now know, they sold trillions of dollars' worth. When it turned out that AIG couldn't pay up, our government--or more sadly, the American taxpayer--was left holding the bag. We were faced as a country with the unprecedented and unpleasant taxpayer bailout to prevent this shocking failure from bringing down our whole economy, or melting down as we were warned. To make the problem worse, we now know AIG wasn't alone. Unregulated derivatives also helped to mask the credit-worthiness of nonfinancial users such as the Government of Greece. We all know about that and what has happened over the last few days and the problems created in Europe as a result of that problem, to their own ultimate or eventual detriment, as we now know. Hedge funds such as Long-Term Capital Management, energy companies such as Enron, industrial concerns such as Proctor and Gamble, and a wide array of governments at home and abroad have all fallen prey to the problems in the derivatives market. I think the solution is becoming obvious--at least we hope it is--to put an end to risky, uncovered bets that leave taxpayers and our financial system as vulnerable as it has been. That is why capital and margin requirements, imposed either by regulators or by central clearinghouses, are so critically important in this area of our economy. Chairman Bernanke of the Federal Reserve described margin requirements as ``an appropriate cost of protecting against counterparty risk.'' The sad truth is this solution has been obvious for some time. You don't need to have just the events of the last couple of years to understand this problem. You can go back 16 years ago. At that time, in 1994, the General Accounting Office produced a report entitled ``Financial Derivatives: Actions Needed to Protect the Financial System.'' At the time of their report, the General Accounting Office determined that the size of the derivatives market was $12.1 trillion--not an insignificant amount in 1994. The report described risks arising from the interconnected relationships between dealers of derivatives and end users, not to mention the rapid growth and increasing complexity of derivative activities because the relationships between the major derivatives dealers and end users, and the exchange-traded markets were so close, the failure of any one part of this system could prove devastating to our entire financial system. This, we knew in 1994, 16 years ago. That was their report. By 2008, 16 years later, the derivatives market had grown from $12.1 trillion that I mentioned a few minutes ago to an astonishing $600 trillion in 16 years. In a related story, it had gone almost entirely underground. Each time the Congress had a chance to act, it chose a legislative path that created even more loopholes, more opportunities for these risks to migrate to unregulated pockets of our economy. In 2000, the Congress passed the Commodities Futures Modernization Act which, to a large extent, explicitly exempted over-the-counter derivatives from regulation by the CFTC and the SEC. So whereas in 1998, 41 percent of derivatives were traded in the shadows, by 2008, 10 years later, that proportion grew to 60 percent-- almost a 20-percent increase in 10 years. Essentially, over time, our financial system came up with more and more ways to take bigger and bigger risks with fewer and fewer safeguards and less and less supervision. That, of course, as we now painfully have learned, was a recipe for disaster, and disaster is what we got. That is why Chairman Lincoln, Senator Jack Reed of Rhode Island, Senator Judd Gregg, Senator Saxby Chambliss, and others of our colleagues have worked so hard over these last number of months to bring the derivatives market out of the shadows and into the sunlight where they belong. That is why the derivatives language in this bill is so critically important if we are going to live up to our descriptions of this bill as a major reform of the financial markets in our country. For the first time in our Nation, over-the-counter derivatives would be regulated by the Securities and Exchange Commission and the Commodities Futures Trading Commission. It includes the Banking Committee's tough requirements for central clearing, exchange trading, capital margin, and reporting that are critical to reducing systemic risk and ensuring that taxpayers would not have to clean up the mess resulting from another AIG implosion. I know the financial sector lobbyists don't like these rules. In fact, over 1,000 corporate lobbyists have flooded this town--this body, in fact--in an attempt to water down these proposals. But Joe Dear, the chief investment officer of the California Public Employees Retirement System, explained it well when he said: Every firm has reasons why its contracts are ``exceptional'' and should trade privately; in reality, most derivatives contracts are standardized--or standardizable-- and could trade rather on exchanges. Thanks to the work of Senator Lincoln and the Agriculture Committee, commercial end users have been carefully exempted from these new rules, so companies such as those candymakers I talked about can keep hedging their commercial risks. In fact, the market in which these companies operate will become safer and less expensive because of the new rules for big players: the swap dealers and major participants. Those big players--the VIPs in the derivatives casino--will have to register with the SEC and CFTC and meet strict requirements for business capital, business conduct, and reporting. Every single transaction will be reported through a clearinghouse or trade repository or directly to a regulator. The SEC and CFTC will have enhanced authority to police these markets for fraud, manipulation, and abuse. Those don't sound like radical ideas. Those are commonsense proposals that I think most Americans can understand, even if they don't appreciate the complexities of these instruments. The combination of these regulatory tools will provide market participants and investors with a lot more confidence during times of crisis, taxpayers with protection against the need to pay for mistakes made by companies, derivatives users with more price transparency and liquidity, and regulators, of course, with more information about the risks in the system. Instead of an underground gambling club, derivatives will be traded in a well-regulated, transparent market, with rules that must be followed and safety provisions that must be respected. Everyone is a winner. Derivatives are valuable and important, and we need to have them out there to help our economy grow. Why should some of these ideas be so frightening to people? It seems to me that if we do exactly what we are talking about here, everybody is a winner in the chain, particularly the derivatives users who will have much more clarity, and regulators and taxpayers are protected against abuses that will occur if we don't try to provide what is being proposed with this legislation. I welcome these improvements. Again, this is a debate back and forth. Despite a lot of hard work between Members of this body to come to some common answers, there are differences that emerge in this debate. The substitute being offered by my friend from Georgia has no requirement for transparent trading and weakens, in my view, those safeguards for major market players. It loosens capital requirements on the large Wall Street firms. That is a huge mistake, in my view, after what we have gone through that would practically beg for another AIG-type crisis. The substitute limits the central clearing requirement to only those trades that take place between the very largest firms, providing a blanket carve-out to other financial firms, and letting much of the market continue to operate without the accountability, transparency, and regulation that I think is so critically important. Unfortunately, there is sort of the status quo. There is some improvement. I acknowledge that. We have an opportunity to make a difference now with the proposals being made by the Agriculture Committee. The status quo is a system in which companies you have never heard of take risks they cannot back up in markets nobody can see. When they collapse, as they inevitably will--one of the things we have said over and over again in this bill is that we are not going to stop the next economic crisis. We are going to have them. The question is, Do we have the tools in place to minimize collapses when they occur? That is what we are trying to do with this bill. Even with the Agriculture Committee proposals, I cannot imagine--and I am sure I am speaking for her when I say this--there is no suggestion that we are going to stop another company from having great difficulties. We want to minimize that when it happens so it doesn't migrate into the rest of the economy. So we are looking to minimize that kind of chaos that can occur when some company collapses for reasons unrelated to this, as we saw with AIG. When they fell, the price the country paid was vastly in excess of one company having difficulties. Taxpayers were put on the hook to fill the capital holes when they occurred. This has to stop. This market needs oversight and regulation. It needs to exist, as well, if our economy is going to grow and jobs are to be created. It has been 18 months since AIG proved that once and for all. It is time to bring this trail of destruction to an end and take the steps necessary to allow this market to operate and people to make these kinds of investments and hedge against the kinds of problems that can emerge down the road, so they don't collapse for reasons unrelated to their own difficulties. That is why hedging is important and why derivatives are important. But also, these safeguards need to be in place if everyone is going to be a winner, as a result of what we are trying to achieve with this legislation. There are debates about various aspects of this bill, and I look forward to that discussion. I hope we will reject this particular proposal, with all due respect to it, and adopt what has been proposed by the Agriculture Committee and consider that there are additional changes we may work on in order to satisfy some legitimate interests. It seems to me we ought to vote on this proposal and move on to other aspects of the legislation. With that, I yield the floor. I see my friend from Nebraska as well as my colleague from Rhode Island.

Mr. DODD. Mr. President, I ask unanimous consent, if I may, that the pending amendments be set aside and that it be in order to call up the following amendments and that once reported by number, they be set aside: Senator Leahy's amendment No. 3823; Senator Durbin's amendment No. 3932, and Senator Franken's amendment No. 3808.

Mr. DODD. Mr. President, at some point fairly soon, I hope to be able to--at the request of the authors of the two amendments--propose two amendments I believe will be accepted. In fact, I know they will be accepted on a voice vote. There is some language being worked out. That will come before we adjourn for the evening. We have also laid down--I believe there will be nine amendments tomorrow, equally divided between the minority and the majority, including the amendment we just heard proposed by my good friend from Alabama, Senator Sessions, along with others. It will be a busy day tomorrow. Today we have done eight amendments, by the time we are finished, which is a good day's work. Obviously, more needs to be done. Five of them were done by recorded votes and three by voice votes. We hope they will be voice-voted. I want to take a minute or so, if I may, to express my feelings about the Sessions amendment. First of all, I am joined in these sentiments by the chairman of the Judiciary Committee, Senator Leahy, who opposes the Sessions amendment as well. Let me explain why I oppose this amendment. I say this respectfully of Senator Sessions, who is a good friend. I noticed in his remarks he did not cite any bankruptcy lawyers opposed to the provisions in the bill. I am not terribly shocked that bankruptcy lawyers would be opposed to a provision in the bill short of bankruptcy, although the presumption is bankruptcy in titles I and II. If my colleagues remember, it was the Shelby-Dodd amendment which we voted on a week ago--several days ago--that took care of the concerns people had about title I and title II of the bill which deals with the resolution mechanisms. Senators Corker and Warner worked very hard on those two provisions of the bill, as other members of the committee did. I want to briefly describe why those provisions are important and why they should remain intact. Of course, we voted as a Senate 93 to 5 in favor of the Shelby-Dodd amendment, codifying the perfections, as Senator Shelby described them, in those two titles. I oppose the Sessions amendment to strike the language creating an orderly liquidation authority, language, as I said, that Senator Shelby and I crafted together in order to end the too-big-to-fail argument once and for all. Most nonbank financial firms, including large and complex ones, will go through the normal bankruptcy process if they fail, and they should. That is the presumption in the bill. The new liquidation authority Senator Shelby and I crafted should be used very rarely. It is a painful process to go through and would certainly not be the avenue of choice given the implications. We have put in some very high hurdles to trigger its use, including judicial review. Moreover, the advance warning systems that we have included in our bill, and the tough new standards we impose on large financial companies, will put in place speed bumps so these companies slow down and become less risky and, therefore, avoid the very issue of bankruptcy or resolution. Early on we try to minimize those events from occurring. When there is a financial crisis, however, bankruptcy may not be the best option. The experience of 2008, especially the bankruptcy of Lehman Brothers and its disastrous effects on our financial markets and our economy, has taught us we need a workable alternative to bankruptcy for the largest, most interconnected financial firms and that the alternative could not and should not be a bailout. Given the choices now, it is just bankruptcy or bailout. We tried to create an alternative under rare circumstances for a resolution mechanism. Throughout 2009, the Banking Committee heard testimony from administration and other financial regulators, experts, stakeholders, and others who all agree the bankruptcy framework is poorly equipped to protect the Nation's financial stability if a very large and complex and interconnected financial firm goes under. Why do we say that? It can be with a large financial firm that is interconnected there are many good, solid firms--it may be that a large interconnected firm will have an effect on some very solvent, well-run firms. Bankruptcy could bring all of these well-run companies down to their knees. None of us wants to be part of that. So we need an alternative other than just bailing out that firm when confronted with that kind of a choice. If the only two choices are bankruptcy, which could take a lot of firms and businesses that are solid, well run, well managed, producing jobs, contributing to our economy--that is the alternative. Those firms then would be adversely and, unfortunately, affected through a bankruptcy process or bailout. Of course, no one wants to write a check for $700 billion again to bail out firms that are failing. The idea of a resolution mechanism under rare circumstances is the alternative choice which we collectively--Democrats and Republicans--after the long work of this committee believed was the alternative in our bill. The Sessions amendment fails to recognize the fundamental difference between the new liquidation authority and bankruptcy. The new liquidation authority is intended to be an emergency exception to bankruptcy. The presumption, again, is bankruptcy. That is where we begin. But if under these rare circumstances that alternative would do more damage to the overall economy, despite our feelings about a mismanaged company, we need to have an alternative. The new liquidation authority is intended to be an emergency exception to bankruptcy when necessary to protect the financial stability, the overall stability of the United States, and not to protect irresponsible creditors. The Sessions amendment, like today's bankruptcy framework, is focused on protecting and repaying creditors of a failed financial firm. It does not provide the tools we need to protect taxpayers from the devastating effects of the next Lehman Brothers. That is why Senator Shelby and I sought to create a liquidation process that would provide for the orderly wind-down of large, complex financial institutions, while still forcing shareholders to be wiped out, culpable management to be fired, and creditors to bear losses, in addition to a prohibition against those very managers who caused the failure from being involved for years afterwards in the financial services sector of our economy. That is a rough road--shareholders get wiped out, creditors suffer, management gets fired, and they are banned from being involved in financial services. That is tough medicine if, in fact, they go the resolution route under our bill. But we need to have at least some mechanism other than just the two terrible alternatives of bankruptcy, that could cause broader financial problems, or a bailout. This is why Senator Shelby and I sought to create this liquidation process. Any payments under our bill to creditors above liquidation value will be clawed back, and large financial companies will be assessed, as necessary, to ensure that taxpayers do not lose a penny. You may recall the debate we had about prepayment or postpayment. We had originally, at the suggestion of my Republican colleagues, a $50 billion upfront assessment on large institutions. Then there was a change of heart by many, and they said: No, you cannot have that out there because that looks like you are providing for a resolution mechanism rather than bankruptcy; the optics of that do not look good. I was never overly committed to that idea. The only reason I included it in the further draft of the bill is because I thought it brought Republican support to the legislation. The irony is, some of the very people who were advocates of it one day changed their minds. So we took it out of the bill. The thing I wanted to make sure of was that taxpayers would not be exposed. The House-passed legislation has $150 billion in a prepayment fund. Again, I heard my good friend from Massachusetts, the chairman of the House Financial Services Committee, Barney Frank, say he would like to take it out as well in light of some of the allegations made about the bill. We took that out. I know my colleague from Alabama referenced that and may not have been aware that was one of the provisions in the Shelby-Dodd amendment, to remove that prepayment fund created in the earlier draft of the bill. Striking the orderly liquidation authority, as the Sessions amendment would, would do just the opposite of what the amendment's sponsors intend. It would ensure we face a repeat of the unacceptable choices between a disastrous bankruptcy where innocent, solvent, well-run companies could be caught in the vortex and drawn down and destroyed in the process or writing that big check that Americans are furious over. So we created this resolution authority to be used under very rare circumstances. The Senate, of course, supported our proposal, the Shelby-Dodd approach, by a vote of 93 to 5. I urge my colleagues, both Democrats and Republicans, to reaffirm their support for ending the too-big-to- fail concept by rejecting the Sessions amendment. I say that respectfully of my colleague of Alabama. He has been a longstanding member of the Judiciary Committee. He knows these issues well. And I understand his concerns. But I believe as Senator Leahy will speak to, either directly or indirectly, this would do great damage to this bill and expose us once again to that taxpayer bailout, which none of us wants whatsoever. Because if bankruptcy would cause greater harm for our economy than the failure of one company, then what are we left with if we reject that idea and we are back to the bailout scenario? None of us wants to be in that situation ever again. I urge, when the vote occurs tomorrow, that we reject the Sessions amendment. Stick with what we have written in this bill--which occurred over many months, by the way. This was not drafted over a weekend, I can tell you that. We have gone back literally months trying to get this right and listen to literally hundreds of people who brought their expertise and knowledge of this process to the table. It was purely a bipartisan effort in our committee, along with others, to craft the first two titles of our bill. I urge, again, the rejection of the Sessions amendment when it occurs. Amendments Nos. 3989 and 3991 Mr. President, I ask unanimous consent that the Durbin and Franken amendments be considered withdrawn, and that the Durbin amendment No. 3989 and the Franken amendment No. 3991 be considered called up in their place.

Mr. DODD. Mr. President, I ask unanimous consent that the Senate now resume consideration of the Landrieu amendment No. 3956 and the Crapo amendment No. 3992; that the Landrieu amendment be agreed to and the motion to reconsider be laid upon the table; that the Crapo amendment, No. 3992, be modified with the changes at the desk; that the amendment, as modified, be considered and agreed to, and the motion to reconsider be made and laid upon the table.

Mr. DODD. Mr. President, again, I want to take a moment and express my gratitude to my colleagues. I want to thank Senator Landrieu. She was involved in a lot of this, so I want to thank her immensely for her contribution. She chairs the Small Business Committee of the Senate and she and my very good friend from Georgia, Johnny Isakson, crafted a very good amendment, which we just adopted. It is going to make our whole section dealing with underwriting a very important part of this bill, and I thank them for that. I want to thank Senator Mike Crapo from Idaho, my colleague on the Banking Committee. He made a very constructive suggestion to this part of the bill. I want to thank his staff as well and the staff of Senator Landrieu, who did a very good job in working through the language this afternoon that allowed us to come to this conclusion. They both couldn't be here at this particular moment, late in the evening, so I am speaking on their behalves, but I thank them both. Again, this is exactly what we are trying to achieve in this bill-- which I know is taking a lot of time on the floor of the Senate--with the contributions of Republicans and Democrats--people such as Johnny Isakson and Mike Crapo, Olympia Snowe, Susan Collins, and so many others who have contributed to this product. We are dealing with a very complex area but a critically needed one for our Nation. We are getting closer and closer to final passage of this bill. We have more amendments to consider, but my hope is that in the next few days we can wrap up the remaining amendments and have our opportunity to vote--to debate on these matters and then get to the point where we can cast our ballots in favor of what I hope will be an overwhelming vote in favor of financial reform in this legislation. Tomorrow, as I mentioned earlier, there will be some nine amendments, at least, that we have set up for debate. I will be looking for time agreements on them. For those who may be listening at this late hour in their respective offices, I would urge them to work with us on time agreements, if they want a decent amount of time, but please do not ask for exaggerated amounts of time. There are still many more amendments to consider. We are going to be here on Friday. We won't have votes on Friday, but I will want to get to all these matters. There will be amendments voted on tomorrow, and additional amendments before we finish tomorrow evening, and then on Friday I will be here to listen to debate, maybe lay down a remaining amendment to be considered on Monday when we come back. My hope is that by Tuesday, no later than Tuesday--at the max maybe Wednesday--we could have final passage on this bill. I know there are other matters the majority leader wants to handle, and I can't thank him enough for providing the kind of window that has allowed this Senate to operate without tabling motions. We have only had one. We haven't had any second-degree amendments on any amendment so far, and no filibusters involved at all on a very major piece of legislation. As I said earlier today, all of us at one time or another talk to students in our respective States, and they ask us about how the Senate functions, and we usually describe exactly what has happened. The unfortunate part is that it rarely does happen in this way. We are not done yet, so I realize we have not completed the process. But this is how this institution was intended to operate. People have a right to offer their amendments, to be heard, to debate them, and then to vote on critical issues facing our country. I never thought a few weeks ago we might actually get to this point where we are engaging in the business of the Senate, offering amendments, debating them, trying to modify where we can to agree on how best to do this. There are 100 of us here trying to craft a piece of legislation that affects 300 million of our fellow citizens in this Nation, not to mention others beyond our own shores because we are setting rules by which we are going to operate. My hope is that these rules will be harmonized with others around the world so we can avoid the kind of catastrophes occurring in Europe as I speak here, as well as the problems that have emerged in the Asian markets and elsewhere. So this is more than just an ordinary undertaking. Yesterday, in speaking to the Chairman of the Federal Reserve Board, he notified me during one of our debates that the central bankers of Europe, because of the availability of technology, were literally watching and monitoring the debate here on the floor of the Senate about a critical issue as it was occurring. That is how the world has changed. Today, the actions we take here not only affect what happens in our own country but elsewhere as well. This is a major undertaking, and I can't begin to express my gratitude to my fellow colleagues for the manner in which they have conducted this debate. My thanks to majority leader Harry Reid in particular. Only through the majority leader can you create an environment that allows this to happen. That is the leadership that Harry Reid has demonstrated over and over and over again in his stewardship as the majority leader of this body. Again, with all the other things he has to grapple with and deal with--many other issues to confront here--this is the kind of leadership the American people expect to see, and he is providing it for our country. Again, I thank as well my colleague from Alabama, Senator Shelby, the ranking member, for his work and the staffs' work. Again I thank the floor staff and others in their respective offices. Mr. President, I ask unanimous consent that the following article be printed in the Record.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Senate proceed to executive session and the Rules Committee be discharged from further consideration of PN1488, the nomination of Stephen Ayers to be Architect of the Capitol; and the Senate then proceed to the nomination; that the nomination be confirmed and the motion to reconsider be considered made and laid upon the table, and that the President be immediately notified of the Senate's action.

Mr. DODD. Mr. President, let me add congratulations to Mr. Ayers. It is a very important job.

Mr. DODD

Mr. DODD. I ask unanimous consent that the Senate proceed to the immediate consideration of S. Res. 522, submitted earlier today.

Mr. DODD

Mr. DODD. Reserving the right to object, just so we are clear, when we dispose of the McCain amendment and related amendments to it, there may be a side-by-side, the next Republican amendment--there will be a Democratic amendment after the McCain amendment. Then the next amendment after that--Republican amendment--will be the Corker amendment.

Mr. DODD. Mr. President, I have yet to meet a Member who didn't think an amendment they offered was going to improve the bill. We can't make that the criteria. First, I appreciate the Senator raising the issue because it is an important question. I have raised with my colleague and the former chairman, Senator Shelby, a package of amendments, technical or others, where we think there is agreement, although he will have to take a look at them to make that determination, not as a final managers' amendment but to try and clear out those amendments we think can be adopted without taking up time for votes on individual amendments. I invite any Member who has amendments, including my colleague from Tennessee, to give us the amendments he or she has or to show them to Senator Shelby, and we will try to accept them where we can. If there is some problem we can't resolve, then we need to provide the time between now and the conclusion of the bill to consider them. I will do my best to see that happens. Let me take advantage of the question to make a plea to my colleagues. Obviously, there is not an unlimited amount of time to debate this bill. We have other matters we are all painfully aware of that have to come up before we adjourn for the year. My hope is Members will provide the time and come forward and we will get short time agreements for some amendments, maybe a bit longer for others that are a bit more substantive and require more debate. But we need to move on this. We have submitted, several days ago, a package of what I thought would qualify as a managers' amendment. We need to get some answers on that so we can try to accommodate provisions to this bill that are good contributions offered by Republicans and Democrats--in some cases both--so we can actually add to the product of this legislation. I appreciate my colleague's suggestion. If we can see them, we will try to agree to all of them. If there is any problem, we will let him know and then thin out that list so we can get to them.

Mr. DODD. 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.

Mr. DODD. I 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, before we recess, let me say that the next amendment up is the McCain amendment, and while we don't have an agreement yet, I am hopeful one will be agreed to right after we come back after the respective caucus luncheons at 2:15 p.m. I am urging Members, again, we are trying to line up these amendments so we can have an afternoon full of votes--a short debate on amendments and then votes. I don't want to hear later people telling me, ``I didn't have enough time,'' when in fact we are trying to provide time for people. You can't have it both ways. You can't say you needed more time and then not be here or get the time agreements to allow us to move forward. With that, Mr. President, I yield the floor.

Mr. DODD

Mr. DODD. I see my colleagues here. Let me say to my friend from Arizona, what I am going to do is call up an amendment that will be a side-by-side arrangement. I will not ask for any time on this, and I appreciate him getting back so we can get a time certain. I call up amendment No. 3938.

Mr. DODD. I ask unanimous consent to dispense with the reading of the amendment.

Mr. DODD. Mr. President, I can't do the math that fast. I don't know what that amounted to, but if we add 15 minutes for myself--why don't I ask for 20 and then I will yield back. I will take maybe 10. I don't have any requests for speakers at this time, but I may want to leave space in case others may want to be heard. If we could calculate what the time is, find out about Senator Shelby, and then lock down the time. I don't need any additional time for a side-by-side. I will use 15 minutes. As soon as we get a number on that, we will let our colleagues know. I thank my colleague from Arizona.

Mr. DODD. Mr. President, let me speak for 5 minutes. I ask the Chair to inform me when I have done so. First, let me notify my colleagues, we don't have a time agreement yet, but I hope we will shortly on the McCain amendment and the amendment I will offer as a side-by-side on this issue. I ask unanimous consent to have printed in the Record letters from the National Association of Home Builders and the National Association of REALTORS, both of which oppose the McCain amendment.

Mr. DODD. I say this with all due respect, but the McCain amendment says that in 24 months we get rid of Fannie and Freddie. I don't call that reform. They are just getting rid of something. What are the implications of just getting rid of Fannie and Freddie? The fact is, Fannie Mae and Freddie Mac, at this juncture, account for 96.5 percent of all funding for all mortgages today. The amendment could undermine the supply without establishing any alternative, and there is no alternative. It just says in 24 months you get rid of Fannie and Freddie. That is a wonderful conclusion, except for the fact that what you get for that--and I don't make up these numbers--is higher interest rates on mortgages, declining values in properties, the possibility of eliminating the 30-year fixed rate mortgage, which only exists because, frankly, we have had the Fannie Mae and Freddie Mac mortgage program. This program needs to be fixed. There is no question about it. We need an alternative housing financing system. That is without question. But this amendment doesn't offer any. It just says get rid of the one we have. As the letter from the National Association of REALTORS reads: [It] places Fannie Mae and Freddie Mac on a fast track to dissolution. REALTORS believe that reform of these institutions, that have played a pivotal role in the evolution of the U.S. housing market, is necessary; however, now is not the time for drastic action. Especially, considering the current role in stabilizing the housing market. [The McCain] amendment does not offer a replacement to fill the enormous gap that the shuttered GSEs will leave. That is what we are being asked to do. In the letter from the National Association of Home Builders, they write: Fannie Mae and Freddie Mac have been, and remain, critical components of the U.S. housing finance system. However, we remain concerned about how to get from the current structure to a future arrangement without undermining ongoing financial rescue efforts and disrupting the operation of the overall housing financing system. Any changes should be undertaken with extreme care and with sufficient time to ensure that U.S. home buyers and renters are not placed in harm's way, and that the mortgage funding and delivery system operate efficiently and effectively as a new system is put in place. We have to do this carefully. It was the housing problems that got us into this mess. It was not Fannie and Freddie. It was this notion of a deregulated environment that occurred. All the problems emerged in the unregulated sector--unregulated brokers, unregulated mortgage companies. They were luring people into mortgages they could not afford, with no documentation, no background checks whatsoever. That is the genesis of this whole issue. Read a new book, ``The Big Short,'' if you want a good read about the genesis of this problem. I should not be in the business of promoting books, but that book will lay out what happened. Fannie and Freddie contributed to the problem further out, but the problem began in a totally unregulated environment, an unregulated environment that was promoted by the Chairman of the Federal Reserve and his advocates and supporters over the years. That is the origin of the mess that got us into this. Today there is no backup. If 96.5 percent of mortgages are backed by these two institutions right now, what replaces it? There isn't any with this amendment. We are left in a free fall. Who gets hurt? Average Americans. Clearly, we have to step up. Our amendment that we will offer as a substitute demands within 6 months a plan be laid out. There are a lot of different ideas on how to do it. We have had a lot of hearings and discussions on what ought to replace the present housing financing system. But I don't know of anyone who has come to one single conclusion on what the best alternative is. Some have advocated a public utility concept. That has very attractive features to it and is one I would be inclined to be supportive of. There are other ideas on how to do this, but to just eliminate it altogether, without an alternative, at a time when we are just beginning to get back on our feet, housing values are beginning to creep up, housing sales are beginning to move forward? Again, if we leave this sector of the economy with the kind of disruption created by this amendment, then we could fall right back into a recession. We have lost 8.5 million jobs, 7 million homes have been lost, 4 million homes today are underwater in the United States, and 250,000 have been seized in the first 3 months of this year. If we want to contribute to that, if that is what our goal is in this bill, to decide on a whim and offering an amendment just to strike these two entities that exist with all their problems, that this is the way to deal with the housing problem, it would be a drastic mistake to make, having an amendment such as this be adopted. That is the reason I feel strongly about it. That does not, in any way, take a backseat to the notion we have to come up with an alternative housing financing system. That is absolutely certain. This amendment does not do that. It just gets rid of the present one without replacing it with anything. That is not the way to engage in the kind of reform that is needed. I think my 5 minutes have expired.

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