Christopher Dodd

Mr. DODD

Mr. DODD. Mr. President, I strongly support the amendment.

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 thank my colleague from Minnesota for raising this very important issue. I point out that home ownership rates for African Americans, who were disproportionately steered into subprime loans, have actually dropped to levels below where they were prior to the explosion of subprime lending. While I agree that subprime lending can be helpful to borrowers with some credit problems, this lending must be properly regulated, as it so clearly has not been over the past decade. I appreciate the work Senator Klobuchar has done on this issue. Her bill is based on the Minnesota law, which I understand is one of the more progressive laws in the Nation. I look forward to working with her on this issue as we move forward. Foreclosure Scam notification

Mr. DODD. I thank the Senator for raising this important issue. I will work with him to address this issue in future legislation so we can help homeowners avoid foreclosure rescue scams and make sure they get the necessary information to find real help.

Mr. DODD. I would concur with my colleague, Mr. Reed. The definition of homelessness in the HEARTH Act is to apply to matters of housing under the Department of Housing and Urban Development. In fact, the amendment expressly states that the HUD homelessness definition is in no way meant to replace or change the definition of homelessness under the McKinney-Vento Education for Homeless Children and Youths program.

Mr. DODD. It is also our intent that the Interagency Council on Homelessness provide increased leadership, coordination, and information on this growing issue of children, youth, and families threatened with homelessness. The amendment requires the Interagency Council to develop a government-wide plan to end homelessness, promote State planning efforts, and of course promote interagency cooperation. We will continue to work with the Council to ensure that the needs of families, children, and youth figure prominently in their efforts.

Mr. DODD. Yes, the committee recognizes that the expansion of the definition of homelessness to include these children and families was carried out with the intent of addressing the housing needs and challenges of children and youth who are homeless.

Mr. DODD. Yes. Federal programs must work together to meet the needs of families and unaccompanied youth, and that collaboration should include information needed for eligibility decisions.

Mr. DODD. I also thank the Senator for her questions, and I would be happy to continue working on to address the issue of homelessness with her.

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

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

Mr. DODD. Mr. President, I thank the Presiding Officer, the floor staff, and others for their work. I thank my colleagues and the staff as well for the tremendous work on this bill over the last several days. I yield the floor, and I suggest the absence of a quorum.

Mr. DODD

Mr. DODD. Madam President, I ask that morning business be closed.

Mr. DODD

Mr. DODD. I suggest the absence of a quorum. The clerk will call the roll.

Mr. DODD. Mr. President, I am going to respond, if I may, to our colleague from South Carolina, Senator DeMint, who offered an amendment, No. 1026, a few minutes ago. Senator Barrasso and Senator Boxer were talking about the Environment Committee and the work that goes on there a little bit, and I digressed a little bit when that subject matter came up, but I want to bring it back to his amendment which we will vote on, I hope, in a few minutes--maybe a couple of amendments. I notify my colleagues we will try to get at least two votes together so we don't bring people over for just one vote, if we can do that. The amendment of the Senator from South Carolina, as I think I understand it--but correct me here--would prohibit the Federal Government from either purchasing or converting preferred stock to common stock. This is not a mandate as in present law, it is the option of converting preferred to common stock. Why is that an important issue? My colleague from South Carolina went on at some length to talk about the overriding issue, going back to last fall, as to whether there should be any program at all of the so- called Emergency Economic Stabilization Act that provided the resources to try to get our financial system on its feet again. That was a very significant debate. Seventy-five of our colleagues in this Chamber, Democrats and Republicans, agreed with President Bush at the time. Candidate Obama and our colleague John McCain, as well as many others, on a bipartisan basis, called for the support of that effort. They accepted the notion as we were told by the chairman of the Federal Reserve Board, Mr. Bernanke, along with the Secretary of the Treasury and others across the political spectrum, that acting at that point was critically important if we were going to stabilize this economy and try to get it back on its feet. History will probably write for many decades to come about that decisionmaking process, of the wisdom of it or the lack thereof. I am confident as I stand here today that, while certainly not a well- managed program for a good many weeks, the absence of doing anything, just doing nothing at the time, I think would have created a far bigger problem, a far more serious problem, probably a problem it would be almost difficult to imagine how it would be overcome had that action not been taken. That in no way minimizes how the program was managed, for those who raised serious issues, and still is the subject of significant debate here. My friend from South Carolina says the Treasury Department should not be allowed to convert preferred stock to common stock. Why is that an important issue in the context of what we are talking about? First, understanding what preferred stock is, and common stock-- preferred stock is almost a debt obligation on which dividends are paid. The whole point is the value of it is in the dividend. With common stock, of course, the value changes based on how well the company is doing. If the company is doing well, the common stock goes up. If they are not doing well, the common stock goes down, unlike preferred shares. So in terms of what is real capital, what is real capital is common stock. Preferred shares are not seen as being real capital. I gather we have had today, as the Presiding Officer knows we have every Tuesday, the respective two parties gather in our respective rooms to have lunch to talk about the issues of the day. I am told by several of my friends on the Republican side that Chairman Bernanke was the guest at the Republican Conference lunch today and answered questions from our Republican colleagues. I gather one of the questions was--and certainly it was a question he received from us when we met, either alone or together--why aren't banks lending more? We put all this capital up. Why aren't they putting more money out the door to small business and others to help our economy get moving? I gather Chairman Bernanke expressed the same frustration, that the regulators are being overly restrictive, in some ways threatening these lending institutions, not doing enough to encourage them that they ought to step up and get that capital out, get that credit moving again. My colleagues on the Republican side heard from the Chairman of the Federal Reserve today and raised a very good question, raised by one of my colleagues--I don't know which one it was who raised the issue--but a very good question: Why aren't the banks lending more? It seems to me if we accept the DeMint amendment we are going to make the answer even more difficult because what our lending institutions need is obviously capital--whether private capital or otherwise, they need capital. This is not a requirement under existing law that is mandating converting preferred to common, but at a time when we want lending institutions to get more capital, allowing the Treasury to make that conversion where and if they see it as appropriate exactly addresses the question that was raised at the luncheon today: Why aren't banks lending more? Why aren't they providing that kind of assistance to small businesses and others? This is not about the Government taking over these entities. I don't know of anyone who supports that idea. We are taking positions in these companies far larger than most of us would like, and I hope and I believe it to be the case that as soon as the moment is appropriate we are going to be selling this off and getting out of it as fast as we can. My colleague from South Carolina is correct--I think all of us agree with him--it is not the business of Government to become bank managers or to run automobile companies or to run commercial enterprises. This country has not grown and prospered and done as well as it has in two-and-a-quarter centuries because Government has run these entities. Quite the opposite. But at a critical time such as this, when our economy is facing the worst crisis since the Great Depression, in almost 100 years, taking positions, getting capital moving on these legacy assets or toxic assets is absolutely essential if we are going to get back on track again. I am not suggesting that every idea we have had is one that is working. But the idea of saying in this case you have no right, I am going to prohibit you, absolutely mandate that the Treasury Department cannot convert any preferred shares to any common shares, seems to me the kind of overreaching, in a way, in a moment such as that, that my colleague from South Carolina is arguing against and I agree with him. We should not be restricting, in a sense, the ability of people to have the flexibility to respond to a situation and allow this situation to improve. There is a second reason. We are talking about TARP moneys here. What are TARP moneys? TARP money is taxpayer money. That is the American taxpayers' money. That is what TARP money is. We want to get back this money. We have been told these are loans. We hope they are, that we are actually going to get money back. You don't get money back necessarily with preferred shares. You get it back with common shares. In any case, if we are looking to see the Government realize any gain on the sale of its common shares after the economy recovers, as we all hope and believe it will, the Government's upside potential is far greater with common shares than it would be under an amendment offered by the Senator from South Carolina where we would not be allowed to convert preferred to common. I want to make it clear I am not necessarily advocating this be the case, but I don't want to so restrict the Treasury from making those moves to adversely affect the taxpayer when we could have a far greater benefit if in fact there are common shares coming back in. If that company or entity improves its value, the taxpayer is the clear beneficiary of that if in fact we are holding common shares. Not allowing the Treasury to make that conversion could directly have an adverse reaction for the American taxpayer who is expecting some return on this--not to mention, of course, the ability to get capital into these entities which is essential if lending is going to occur. We can go back and debate September and October and I presume history will debate that. But we made that decision and these resources are being far better managed today than they were in the first 60 days or so of that program. Today, to restrict this Department, this Treasury from making these kinds of decisions would be a major blow at the very hour we are going to maybe need this capital in order to get these entities back on their feet. Why is that important? It has little or nothing to do with the entities themselves. If that were the only argument, I would not be standing here and making it. It is not about the institutions we are getting the capital to, it is about the facilities, the businesses that require capital in order for credit to flow. So we spend a lot of time talking about the capital that goes into these larger institutions. The only reason we talk about it is because the financial system requires that if credit is going to move to small businesses, to homeowners and the like, when that small business shows up at their bank and says: Look, I have a great idea of expanding. I think the economy is improving. I would like to get a loan. I would like some credit. I have some people I need to hire. I have some inventory I need to purchase. I have some improvements to expand my space, and the bank says: I am sorry, we cannot. No capital. Well, if we adopt the DeMint amendment, that will be one of the reasons the answer is no because we absolutely prohibited the Treasury Department of our country from converting, where they think it is wise to do so, preferred shares to common shares. Not because we are requiring it but because we have the flexibility to do it. When the American taxpayer wants to get a greater return on the investment we have made to get these institutions back on their feet again, and all we were allowed to hold was preferred shares paying a dividend instead of the common shares that could be the upside benefit to the American taxpayer, we would have to look back on this amendment and say: That is the reason we are not doing better than we ought to be doing. That is really the argument I would give to my colleagues about why I think the DeMint amendment is an unwise move at this juncture. Again, it is more ideological. If you, in a sense, believe we should not be doing anything at all, let the market work its way through all of this--and there is a school of thought that embraces that. I happen to believe that is a dangerous policy to follow, in my view. I think many who looked at this issue from across the spectrum would agree. So that is the alternative. That is why I hope this amendment would be rejected when the time comes for a vote. I yield the floor.

Mr. DODD. I appreciate the Senator from Wisconsin raising this issue and I will be pleased to work with him to arrange such a meeting, and to ensure that the Treasury Department looks into the concerns raised in the Senator's amendment.

Mr. DODD. I want to give my colleague from Rhode Island a chance to be heard but--let him offer his amendment.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety, and Security of the Committee on Commerce, Science, and Transportation be authorized to meet during the session of the Senate on Tuesday, May 5, 2009, at 3 p.m., in room 253 of the Russell Senate office building.

Mr. DODD. Mr. President, I ask unanimous consent that the Senate Committee on the Judiciary, Subcommittee on Terrorism and Homeland Security, be authorized to meet during the session of the Senate, to conduct a hearing entitled ``The Passport Issuance Process: Closing the Door to Fraud'' on Tuesday, May 5, 2009, at 2:30 p.m., in room SD-226 of the Dirksen Senate office building.

Mr. DODD. Mr. President, I ask unanimous consent that the Committee on Finance be authorized to meet during the session of the Senate on Tuesday, May 5, 2009, in room 106 of the Dirksen Senate office building.

Mr. DODD. Mr. President, I ask unanimous consent that the Committee on Foreign Relations be authorized to meet during the session of the Senate on Tuesday, May 5, 2009, at 2:15 p.m.

Mr. DODD. Mr. President, I ask unanimous consent that the Select Committee on Intelligence be authorized to meet during the session of the Senate on May 5, 2009, at 3:30 p.m.

Mr. DODD

Mr. DODD. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. Res. 128, submitted earlier today.

Mr. DODD

Mr. DODD. I yield the floor. Amendment No. 1019

Mr. DODD. Mr. President, I see our colleague from Florida has arrived. I will take a few minutes and then ask unanimous consent that he be recognized as the original author of the safe harbor provision so he has a chance to explain his point of view. Let me begin. Again, it is not necessarily the most compelling of arguments, but I think it is worthy of note that those organizations who are opposed to the amendment of the Senator from Tennessee include the Consumer Federation of America, the National Community Law Center, the National Association of Consumer Advocates, the Housing Policy Council, the Financial Roundtable, the Center for Responsible Lending, the Mortgage Insurance Corporation, mortgage bankers, and the ABA. This is a pretty rare collection, when we get the major consumer groups that watch all this stuff very carefully, as well as some of the major lending institutions. They never come together on anything. It is a unique moment on this proposal. Let me say to my friend from Tennessee, I don't like the situation we are in either. This is not the ideal world because his point about contracts is a valid one. There is no question. I pointed out there are contracts with second homes and vacation homes and the like as well. We had no problem with the cram-down with mortgages involved there. We have a prohibition on primary residences, but we make the exception with other properties. Frankly, had we taken the Durbin amendment, that might have minimized the importance of what we have here. Here is the problem: 10,000 people a day are losing their homes; 20,000 a day are losing their jobs. The question is, How can we possibly get the kind of incentives so the bankers, the servicers, the lenders, and the borrowers can modify these mortgages? We now have 11 million homes in this country where the mortgage exceeds the value of the property. If we don't step up soon, those numbers will explode. We have a moratorium on foreclosures in certain areas, and that is just building up a backlog that if we don't end up with some means by which that borrower and lender can work out an arrangement that they can modify the mortgage, we will face a cascading effect which most people agree is the root cause of our financial difficulties, beginning with predatory lending and subprime lending that helped create this problem with no-documentation loans, the liar loans and the like. What we have crafted is a rather narrow answer. They have a safe harbor provision which is very broad and, frankly, it can be narrowed. That is what Senator Martinez has done with his proposal. What we are talking about are loans in the private label securities. That represents about 16 percent of what we are talking about. Yet within that 16 percent, in excess of 62 percent of those loans, are seriously delinquent loans. So while it is a relatively small number compared to the total mortgages being written, in terms of delinquent mortgages, it represents a fairly significant majority. We are narrowly dealing with those. Then we are talking about two circumstances in which they voluntarily can move. That is with the Obama plan or the HOPE for Homeowners. We are not limiting it. If people don't want to do it, there is no requirement that they do it. We are trying to remove one of the great barriers, and that is the fear of litigation. The servicers are saying: We would like to do this. We understand the value of it. We want to get paid. Banks want to get paid. Borrowers want to stay in their homes. Everybody seems to agree on that. Here is the problem: If we end up modifying this, the investor, not an illegitimate point, says: Wait a minute, we had a contract with you, Mr. Servicer. You are going to now modify this, violating our interests as an investor. Therefore, we are going to sue you. That is the fear. So the servicer says: I am not going near this. I respect the fact the borrower would like to get out of this situation in an affordable mortgage. I would like to get paid something in the process. But I will not go through the kind of litigation that will occur if there is not a safe harbor. Hence, the Martinez amendment. In these narrow circumstances involving 16 percent of this market, and of which 62 percent are the delinquent mortgages, under two fact situations, the HOPE for Homeowners and the Obama mortgage modification plan, we provide for that safe harbor, saying to that servicer, if, in fact, you move forward, we will provide you with that harbor and avoid the potential of litigation, in some cases even frivolous litigation. Again, in a perfect world, would I like to avoid that and do what my friend from Tennessee wants? Absolutely. But there are no perfect choices, and yet there are some potential dangers. I don't like setting a precedent. We narrowly define this in time and circumstance, only involving those that already occurred, and the problem dies or is sunsetted in December of 2012. So this is not a perpetual program. It is limited to the fact situation, limited to opportunities in order to try and provide some relief primarily to the consumer, to the person holding that mortgage or the person having that mortgage who runs the risk of losing their home. We have tried, for a year and a half, all sorts of different ways. My friend from Tennessee and the former Secretary of Housing and Urban Development, Senator Martinez, who knows something about these issues, will recall we tried, in the spring of 2007, to get these people together to try and work out things. They promised they would try. They never did. Then we drafted legislation, far from perfect because we are back today talking about it, called HOPE for Homeowners. We tried all sorts of means by which we could slow down the foreclosure problem. Regretfully, we have not been as successful as we would like. There is no guarantee this will work as well as we would like either. I say that as a coauthor of this bill overall, and I appreciate my colleague's fine comments about the effort. But it is an attempt to try and provide some space, in these very delinquent mortgages, to provide an opportunity for a modification so people can stay in their homes, borrowers can keep their homes, lenders get something back, rather than going to foreclosure in which the implications for everyone are devastating. Again, the investor does not have an illegitimate complaint, but in the context of balancing these interests, where, again, no one is going to come out of this perfect, in a way I think it is in our interest to try and do what we can to keep people in their homes and have the lenders be able to get something back. Hence, that is why you see this very unique coming together of various interest groups, from the consumer advocates to the major lending associations, saying on this point, they think this is the right--at least worthy of our attempt to get this right. Again, I respectfully say to my colleague from Tennessee, I appreciate his points. He and I talked about this. But I honestly believe in this case this would be a mistake to accept this amendment and to run the risk of losing the opportunity to get that safe harbor opportunity. With that, I yield to my colleague from Florida.