Christopher Dodd

Mr. DODD

Mr. DODD. First, let me begin by thanking both of my colleagues from North Dakota and South Carolina for their interest in the subject matter. Now, as I pointed out, 2 years ago tomorrow, I think it was, February 7, 2007, as the new chairman of the Banking Committee, I held my first hearings, and the first hearings were on the foreclosure crisis. At that time, a fellow by the name of Eakes testified before the committee and predicted 2.2 million foreclosures in the country. He was scoffed at all across the country for having such an outrageous prediction. In fact, the criticism was correct. It was an outrageous prediction, because it was not 2.2 million, it is now 8 million. I see my friend from New Jersey, Bob Menendez, who was at that hearing 2 years ago today. And he predicted a tsunami, were his words-- I will never forget them--of how foreclosures were occurring in the country. And again, people laughed and ridiculed and suggested that we were somehow predicting things that were never going to happen. We have all learned, painfully, the results. We are in the pickle we are in today because we didn't respond to the foreclosure crisis at the time. This is a major problem that deserves major attention. When we wrote the so-called TARP legislation in September, we required four things. I won't bother with the first three; they were accountability, taxpayer issues. One of the four points was to mitigate against foreclosures. We have learned, painfully over the last number of weeks, that virtually nothing was done about foreclosure mitigation with the original $350 billion tranche. My concerns--and I appreciate immensely the effort we are finally getting some attention to this issue and looking for resources--are the following: One, I am not sure foreclosure mitigation ought to be a part of a stimulus package. You can make a case for doing something about foreclosures, but that is why we have the TARP program. It is not only the financial system. They are, of course, interrelated. It is not like there is a housing issue and a financial system at risk that are separate issues. They are the same issue, the foreclosure issue and the financial mess. I am going to be offering shortly, along with Senators Reid and Martinez, legislation that requires that of the $310 to $350 billion in the second tranche, that $50 billion be dedicated to foreclosure mitigation because that was what the intention was originally. While I am attracted to the proposal made by Sheila Bair at FDIC--and I mention that in the amendment as one of the ideas, but there are a number of ideas. I say, respectfully, to both my good friends, Senators Graham and Conrad, as I read the amendment, it would require the adoption of the Sheila Bair approach. To me, that is worrisome because it is one idea but not the only idea, to allocate $20-some-odd billion to one idea at a time when we ought to be looking at various ideas that might actually work to mitigate foreclosures. She believes $25 billion would do 1.2. She thinks $50 would double that number to 2.2 or close to 3. We have a lot of numbers that get thrown around here. My point is, it ought to be something we try not to congressionally mandate. We are good at a lot of things in the Congress, but when we start micromanaging ideas such as this, we get ourselves into trouble. That is why, hopefully, we have smart people out there who will consider ideas and manage them well. But up here, when you try to set accounting standards or rigidly determine a particular formulation, I get uneasy. The amendment we will offer goes beyond foreclosure mitigation. We also clean up HOPE for Homeowners, which we all supported last summer-- almost all of us did--as a way to try and also deal with foreclosure mitigation. My concern would be that the adoption of this amendment would preclude the adoption of the second amendment. I, respectfully, suggest that what we have offered as our second amendment is a more comprehensive approach. I have held 82 hearings. I see my friend from Kentucky, Senator Bunning, a member of the committee. We spent a lot of time over the last 2 years on these issues. We haven't all agreed every time on everything--but 82 hearings and meetings, a third of which were on this subject matter alone. I know we all respect each other for doing the jobs we try to do. But having spent this much time trying to figure out what is the best answer, it seems to me TARP resources ought to be used, stimulant money ought to be used for job creation. Not that I wouldn't like to have extra resources to deal with this. We ought to have a broad approach so we are not rigidly locked into a congressionally mandated formula. I won't bother to address offsets. My colleagues are trying very hard to do what we all ought to do and that is to pay for various things. I will let others go down the list and whether they like or dislike the various offsets.

Mr. DODD. I ask unanimous consent for 1 additional minute.

Mr. DODD. I find myself sort of in an awkward position. I don't want to be in the position of disagreeing with trying to do something about foreclosure mitigation. But we end up doing this and the next and we get to 75 or in excess of $75 billion for this particular issue, we are getting excessive, it seems to me, without knowing whether a smaller amount might achieve the job. If we are mandating it with two provisions, then we are excluding resources that could be used for other things, including job creation, which is the debate about the stimulus package. My friend from North Dakota and I have talked about this privately, and I thank my colleagues for raising the issue. I truly have mixed emotions about this because I like what they are doing on the one hand, but I am concerned that as between the two choices-- the one Senators Martinez, Reid, and I will offer and this one--I think we offer a more comprehensive one, one that relies on greater flexibility and uses TARP money rather than stimulant money to achieve the result.

Mr. DODD. There is only in this sense. This bill has a specific requirement that a particular plan be adopted and funded with this proposal. I admire Sheila Bair's proposal, but we also recognize there are others. At the same time, if we are dealing with foreclosure mitigation but not getting that person who is probably in foreclosure because they may have lost a job, if we don't make it possible for them to get back to work because we minimize the resources in the stimulus, saving their home but not saving their job ends up with sort of a very mixed message.

Mr. DODD. Well, then 2 minutes.

Mr. DODD. Mr. President, this is, obviously, a discussion that has provoked a bit more discussion than I think any of us anticipated, and it is a worthwhile discussion. So I ask unanimous consent that there be an additional 10 minutes because I know there are several other Members who want to be heard on this amendment, and certainly my colleague from North Dakota may request some additional time as well. We may not use it all, but to give us enough time to flesh this out, if we can, I ask for 10 additional minutes.

Mr. DODD. Mr. President, I yield whatever time my colleague from New York would need.

Mr. DODD. Mr. President, first of all, acting now or acting later-- assuming we vote on this amendment offered by my friends from South Carolina and North Dakota, within minutes after that, I will be offering the amendment that would require that the $50 billion come out of the TARP money. I do not know what delay we are talking about. We are promoting the same piece of legislation. The money has already been appropriated to deal TARP, so it is there. So the question is not about delaying one in favor of the other. The question is, Which pot do you want to draw from? This is sort of a disconnect amendment. We were debating a stimulus package, I thought. Maybe we are not. I know there is some debate about that in the Chamber.

Mr. DODD. Mr. President, I yield to my colleague for a question.

Mr. DODD. Mr. President, I appreciate the remarks of my colleague. I only have 1 minute. I have not been directly involved in the Finance or Appropriations Committees, but I have listened to the debate over the last several days, and I think the debate is this: Is this bill a stimulus bill? If it is a stimulus bill, we are talking about job creation. Is it a foreclosure bill? Maybe we changed the debate. If it is a foreclosure debate, I thought I was on something else. So if we want to talk about putting people to work and simultaneously now we are going to take $23 billion out of the stimulus bill and put it in foreclosure mitigation, it seems to me this is a different debate. I would just say to my colleagues as someone who has chairmanship with jurisdiction over TARP at this point: No, the money has not been allocated. In fact, we have the Secretary of the Treasury coming to our committee on Tuesday to describe exactly what their intentions are with the $310 billion to $350 billion, and I don't know what it is yet. This much I will tell you. I went through all the debate and the discussion last fall with the previous administration, and we as a body said: We want you to do three or four things with that money, one of which is foreclosure mitigation. I got the commitments, all the handshakes, and not a nickel of it was spent on it. I am assuming this new crowd may be a bit different on that subject matter. But if you were to ask me whether I have a commitment that any of that $310 billion or $350 billion is going to be spent on housing, my answer is I don't know. I have an amendment with Senator Martinez and Senator Reid in a minute that mandates that $50 billion go to foreclosure mitigation out of the TARP funds. No debate any longer, you have to do it. You know, burn me once, burn me twice--we all know the expression. So I am not going to run the risk of watching another TARP come along and end up going to Citi and Bank of America and everyone else and nothing happening on foreclosure mitigation. So it is a choice we have to make. We have a stimulus bill to do something about job creation. That is the debate over the last week. Many of my colleagues on the other side have raised issues about whether we are spending money to actually create jobs in the country. That is a legitimate debate. But you can't on the one hand complain about this bill because it doesn't create jobs and then offer a $24 billion amendment that doesn't do anything about jobs. It deals with foreclosure. Now, if you are going to take $75 billion and dedicate it to a subject matter that can be handled with a lot less, that is a waste of money. So it is a matter of choices. We are bypassing each other. The debate is about stimulus. Now, $16 billion, $17 billion of the money comes out of one fund for States. My colleagues ought to look at this. There is a lot of other spending. I am not going to pretend to understand this; I don't serve on the committee. I respect those who think some of this is unnecessary spending. But $17 billion going back to the States for job creation, I would remind my colleagues, is what they cut out of the bill if this amendment is adopted. I suspect the States all across this country may be counting on some of that for job creation, maybe not.

Mr. DODD. I ask unanimous consent for 1 additional minute.

Mr. DODD. We are going round and round on this, but I find this debate--again, I want to make the point that I am grateful to both of my colleagues for raising the issue of foreclosures in housing. I find myself somewhat at cross-purposes because, on the one hand I agree with what they are trying to do; on the other hand--I say this respectfully--I think we are undermining our cause by approaching it this way. We are diminishing the effect of the stimulus bill by doing something on housing, which is a legitimate issue but is not the subject of the debate of the underlying bill, and we are simultaneously potentially denying our opportunity to mandate that this new administration dedicate resources within the TARP to deal exactly with the underlying cause of the economic crisis. So that is the real choice involved. Again, I say it is an awkward debate and argument. I know Senator Inouye and others wish to be heard on these appropriations issues and, particularly, I suspect the $16 billion to the States. I will let my colleagues make that case. I know Senator Inouye would like some time on that to address that issue. But that is the real point in a sense. I have listened to my colleagues say this bill is loaded up with things that don't effect job creation, and I would say, respectfully, by insisting upon foreclosure mitigation in this bill, it seems to me we are just contributing to the very arguments being made about the underlying criticism of the legislation. I yield the floor.

Mr. DODD. I see my good friend from Arizona and my friend from Oregon. They have been patient. We debated my amendment already so I am just going to be very brief. Senators Conrad and Graham and I were discussing the Conrad-Graham amendment. I talked about the alternative idea that I am proposing with Senator Martinez and Senator Reid of Nevada, and that is to acquire in this bill--I realize it doesn't relate to the funding in this bill--it would require that $50 billion of TARP money that will now be allocated be dedicated to foreclosure mitigation, including looking at the Sheila Baird FDIC proposal, but not exclusively so. Also, as a second part of that amendment, I suggest some alterations to the Hope For Homeowners Program that we think would make the program far more effective than it has been. Despite the good intentions of its authors last summer, myself included, it has not produced anywhere near the results we desired. These were suggested by Treasury and others who thought it would help make it more attractive to those in foreclosure. At the appropriate time, myself and Senators Martinez and Reid will offer this amendment. Again, I say to my good friend Senator Conrad and good friend Lindsey Graham, I respect the effort they are making. I don't think what they are talking about in the stimulus bill is justified when we can do it out of TARP, and the money that is being suggested should be more focused on stimulation and job creation. For those reasons, I oppose the Conrad amendment. I remind my colleagues this amendment that Senator Martinez and I will be offering is the right approach for us to be taking regarding TARP funding, which was dedicated initially, at least in part, toward foreclosure mitigation. We are going to require it statutorily, lest there be any doubt in the minds of those managing the program what our congressional intention was when we passed it back late in October. Mr. President, with that, I apologize for taking any time at all and yield the floor.

Mr. DODD

Mr. DODD. I move to lay that motion on the table. The motion to lay on the table was agreed to. Amendment No. 145, as Modified

Mr. DODD. Madam President, I will take part of the 1 minute and then offer time to my colleague from Florida, who is my cosponsor on this amendment, Senator Martinez, to quickly address the amendment. This amendment is the response to how we ought to deal with the foreclosure mitigation issue. We require in this amendment that $50 billion of the second tranche of the TARP money be dedicated to foreclosure mitigation as well as some modifications of the HOPE for Homeowners Act. The third part--I want to commend my colleague from Florida--is a very solid and wise suggestion he made dealing with services, and I yield to him to explain his part of the amendment.

Mr. DODD. Madam President, I commend my colleague for his very wise suggestion to this amendment.

Mr. DODD. Madam President, if I could have 30 seconds to respond?

Mr. DODD. Taxpayers not losing their homes is preserving something-- not getting something back, No. 1. No. 2, when we wrote the original legislation in September, there were four requirements that we expected of the TARP funds, one of which was foreclosure mitigation. Regrettably, nothing was done at all about it. Not a nickel was spent on foreclosure mitigation. We are merely fulfilling the obligation we agreed to when the TARP legislation was adopted on October 1.

Mr. DODD. Madam President, I will accept a voice vote at this time.

Mr. DODD. I move to reconsider the vote.

Mr. DODD

Mr. DODD. Mr. President, first, I commend our good friend and colleague from Montana. He has been on the Senate floor it seems endlessly over the last several weeks with a number of bills--SCHIP and now this stimulus package and others. I commend him and his staff for the tremendous job they have been doing. It is a lot of hard work. They have been very patient with all of us. Senator Inouye as well, and his staff on the Appropriations Committee. They have done a good job as well. I have two amendments that will be offered at some point later today. I wish to take a couple minutes to describe each of them since we will have limited time during the series of votes that will occur to describe them in detail. The first amendment I will be offering, along with Senator John Kerry who offered to be a cosponsor of this amendment, involves the mitigation on foreclosure issue. It was exactly 2 years ago the day after tomorrow that I held my first hearing as Chairman of the Banking Committee on the foreclosure issue. At that time we had a hearing on this issue. I warned at the time, as did several of my colleagues on the Committee, about the serious mounting problems with the threats to the residential mortgage market in the country and what this could likely do to our economy if we didn't put a tourniquet on this beginning hemorrhage in the residential mortgage market. At that time, Martin Eakes, who is President and CEO of the Self-Help Credit Union and the Center for Responsible Lending, predicted at that hearing there would be over 2 million foreclosures in the United States. This was in February of 2007. The reaction from the Mortgage Bankers Association and other industry groups was immediate and definitive that day. No way, they said. They accused Mr. Eakes of crying wolf and exaggerating the problem. Well, the industry was half right. Mr. Eakes and the consumer advocates were very wrong. We weren't facing 2 million foreclosures. We now know we are facing 8 million foreclosures 2 years later. And of course we are all painfully aware of the condition of our economy today, the worst since the Great Depression, going back 80 years; and, unfortunately, getting worse every day, with 20,000 jobs a day being lost in our country, and somewhere between 9,000 and 10,000 homes being foreclosed. When we wrote the TARP program in the fall of last year, one of the major provisions was to mitigate foreclosures. Regretfully, very little has been done on that issue, and today we still see the mounting foreclosures in our country. In fact, last summer, we passed the Hope for Homeowners legislation. This amendment I am offering today does two things: one, it makes it possible for the Hope for Homeowners bill to work better than we intended it would back in July by eliminating several provisions in that bill, or at least modifying, including lowering the future equity that homeowners must share from 50 percent to 25 percent of the original price; reduce the upfront and annual premiums charged to borrowers under that program; provide incentive payments to servicers who participate in the program; and allow for bulk sale of mortgages at discounts to promote a higher volume of loan modifications. Now, these ideas will increase participation, which has been almost nonexistent. With these modifications, there are many who believe we will see a substantial increase in people taking advantage of that program. The second part of the amendment is one that would require within 15 days of the enactment of this legislation to develop a program in consultation with the Chair of the Federal Deposit Insurance Corporation, the Chair of the Federal Reserve Board, and the Secretary of HUD to develop a program to mitigate additional foreclosures. We would require and devote no less than $50 billion of the TARP fund--not of the stimulus package, of the TARP funding--to go to a loan modification program. And the program, I would point out, is expected to prevent at least 2 million foreclosures in the country. The amendment does not dictate any particular loan modification plan. I think we owe the administration, which has committed to moving on this matter, the ability to develop the best plan they are able to. So I leave it up to them to decide how this can be done. I am particularly attracted to the plan Sheila Bair at FDIC has promoted, but I know there are other ideas. But at least here we would commit $50 billion of that $350 billion to do something that will require and mandate that we begin to deal with this problem. I don't know of anyone who believes today that if we don't deal with the foreclosure problem we will not get to the bottom of our economic crisis. I have been saying it for 2 years. We had 30 hearings in the Banking Committee, of the 80 we held in meetings on this subject matter, and witness after witness, regardless of ideology or political stripe all said the same thing: We have to deal with the foreclosure issue. Today, with 8 million homes in jeopardy, 9,000 a day being lost, we finally I think have to say with some certainty that if we are going to be using this next tranche of $350 billion, we have to dedicate $50 billion of it to foreclosure mitigation. So in addition to the modifications to the Hope for Homeowners, the amendment would also require that $50 billion be spent of the TARP program on this issue. The second amendment I will be offering deals with executive compensation. Now, let me say right at the outset, this issue can be trivialized, if we are not careful. I think a lot of attention has been paid to this issue because, obviously, it is infuriating to people when they watch taxpayer money go into an institution and then they read where top executives walk away with multimillion dollar bonuses or contracts. It absolutely is more than infuriating to people when they read about it and hear about it. The problem is, if you don't do something about this, we are never going to be able to build the confidence and optimism people need to feel about the larger part of this program. So a tremendous amount of heat and understandable anger is focused on executive compensation. Again, I emphasize that I think there are other issues we need to deal with, but in order to deal with and build some support for them, we have to deal with the executive compensation issues. This amendment does so. I realize this is painful for some, and I am not suggesting everyone who has been receiving bonuses or excessive compensation is necessarily an evil person at all. Quite the contrary, in many cases they are good people. But there needs to be a sense of reality that if you are literally dumping billions of dollars into these institutions to try to save them, when in many cases the very people who mismanaged these operations are walking away with millions of dollars in compensation. You can begin to understand why people in this country are so angry. Let me describe a few of the major provisions regarding this. The amendment would ban bonuses, retention bonuses, and incentive compensation for some of the most senior employees at TARP recipient firms. It would authorize the Secretary of the Treasury to increase the number of executives ineligible for such compensation if he deems it to be in the public interest. Secondly, this amendment is not only about the prospective TARP recipients, it also requires the Secretary of the Treasury to conduct a retroactive review of past bonus awards, retention awards, and other compensation that TARP recipients paid to employees. If the Secretary determines any payments were excessive and inconsistent with the purposes of TARP or otherwise contrary to public interest, the amendment directs the Treasury to seek to negotiate a reimbursement to the American taxpayer. Currently, shareholders of public companies may offer proposals on executive compensation, but it takes an initiative by the shareholders. We apply that provision now to TARP recipients. Under this amendment, it would require the TARP recipient of the company to automatically put a proposal on these cash bonuses and compensation on its annual proxy statement to shareholders without requiring shareholders to make a prior request or formulate the proposal. Such proposals would call for an advisory shareholder vote on the company's executive cash compensation program. This ``say on pay'' vote would enable shareholders of TARP recipients to voice their views. And as the owners of the companies, I think they ought to be heard on these matters. Thirdly, under the Emergency Economic Stabilization Act, we included a clawback requirement, which allows the TARP to recover any bonuses or incentive compensation paid to an executive based on reported earnings or other criteria later found to be materially inaccurate. This amendment expands the number of senior employees who would be subject to this clawback as well. As former SEC Chairman Bill Donaldson wrote not that long ago, and I quote him: People with targets, and jobs dependent on meeting them, will probably meet their targets--even if they have to destroy the enterprise to do it. This amendment ensures that isn't the case for companies receiving TARP funds. First, it would prohibit any compensation plan that would encourage the manipulation of reported earnings. It would also create a compensation committee composed entirely of independent directors--not only monitoring the objectivity of compensation awards but evaluating compensation plans and their potential risk to the financial health of the company. Finally, the amendment would require the chief executive officer of the TARP-receiving company and the chief financial officer of the company to certify compliance with these requirements. We have required that under Sarbanes-Oxley, and I think in this area we ought to do it as well. There will be those who think these are excessive, but unfortunately, what we have seen is excessive. If we are going to convince the American public that what we are trying to do is in their interest, then we have to be certain when it comes to these matters. Again, I urge my colleagues to be supportive of this. It is broad, it is far reaching, it gives the Secretary additional powers, but it allows us to deal with these issues in a comprehensive fashion. Unless we do this, I will tell you that I think it will become virtually impossible to get this Congress, either body, to support any additional funds of this nature that may very well be needed. Unless we start to calm the anger of the American public over how some of these dollars are being used, we are never going to succeed in that effort. So while it is not a significant portion of the money overall, it is a significant cause of the lack of confidence, and therefore I urge my colleagues to support the amendment when it is offered. The first amendment is on housing, and this one is on executive compensation. I apologize for taking a little longer. I know other Members wish to be heard.

Mr. DODD. Mr. President, I may not need the full minute. This is the amendment dealing with executive compensation. There are a number of proposals. This is one that would set some limits, basically allowing for some reaching back if, in fact, TARP businesses are found to have violated various provisions of law. It would allow the Secretary to negotiate resources to come back if there has been excessive compensation. I say to my colleagues, our colleague Senator Vitter in the Banking Committee made a point I wish to repeat. This is not the single most important issue. In fact, it could be trivialized. We all appreciate when we talk to our constituents about the TARP program, many of our constituents are so angry with what they see in executive compensation, it is difficult to have a conversation about the larger questions. We are trying to deal with this issue in a thoughtful way that does not impinge upon their ability to compensate people, but simultaneously we are not reading about compensation going to executives where billions of dollars have gone to those companies abusively. This amendment is to deal with that particular problem. I urge my colleagues to support it.

Mr. DODD. Mr. President, I move to reconsider the vote.

Mr. DODD

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

Mr. DODD. Mr. President, I want to add my voice to that of our colleague from Georgia, Senator Isakson, in support of his amendment. This is an idea that is not inexpensive to do, but I think it may be the kind of confidence-building measure that is necessary to free our credit markets and begin to get the housing issue moving again. It is not the only answer. I think it is a critical component and element in achieving the results we all desire. I think our colleague from Georgia came up with an idea worth our support. Therefore, I am going to be a cosponsor as chairman of the Banking Committee, and I urge my colleagues to support it.