Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Madam Chair, I yield 2\1/2\ minutes to the gentleman from North Carolina (Mr. Watt), a major shaper of the best parts of this bill.

Mr. FRANK of Massachusetts. Madam Chair, the SEC has recognized the potential problems for people under $75 million. They are not now subjected to this. The question is not whether they should be immediately put under this, but whether they should be given a permanent exemption without giving us a chance to have the SEC continue its development of more appropriate rules. The notion that no such requirement should apply, there is an absolutism here that seems to me in error. Yes, the SEC should treat companies at $75 million and below differently than people that are at a billion dollars and above, et cetera. But they are in the process of doing this. This is an exemption that is unnecessary at this time. If and when the SEC decides that it is ready to cover them and Members here think that they haven't done an adequate job of providing for it, a motion like this might be in order. I understand the desire of people to help smaller businesses. But at this point it is a license for people who might want to be abusive by guaranteeing them that they will never be audited despite any effort to make an appropriate audit.

Mr. FRANK of Massachusetts. Parliamentary inquiry, Madam Chairman. Is it not in order for the gentleman from California to offer his amendment now?

Mr. FRANK of Massachusetts. If the gentleman would yield, that was also in the manager's amendment, so it will not be offered. It's in the manager's amendment.

Mr. FRANK of Massachusetts. I yield the gentlewoman an additional 15 seconds.

Mr. FRANK of Massachusetts. I will yield myself my remaining time. How much is that?

Mr. FRANK of Massachusetts. Madam Chairman, I claim the time in opposition.

Mr. FRANK of Massachusetts. Madam Chair, pursuant to section 4 of House Resolution 964, I request that amendment No. 11 be considered out of order. If I may elaborate, it is for the purpose of en blocing some amendments.

Mr. FRANK of Massachusetts. If the gentleman would yield, with regard to the permanent audit team, they may be the largest institutions, and that is a somewhat separate question, but for those who don't have a permanent audit team, not only would it be better for the regulated entity, it would be better for the CFPA. As any agency, they will have limited resources. If you have a bank that has $13-, $14-, $17 billion in assets and has had a good record, as most of those banks have had in consumer affairs, it would be a great waste of regulatory resources to be doing that when they would have the option, instead, of simply sending a CFPA member to join the other team. So, yes, I would hope that the CFPA would take full advantage of this authority with those banks.

Mr. FRANK of Massachusetts. Madam Chair, I demand a recorded vote.

Mr. FRANK of Massachusetts. Again, the question is whether we should decide now that there will never be such a requirement. As to it costing a lot of money, the amendment specifically says that they should be allowed to use noncash collateral. That means they could pledge certain of their own assets, which could mean no cost. It also says that the regulators shall impose the requirements commensurate with the risk involved in the transaction. Once again, we give incentives here for people to minimize risk, and I think that's the appropriate market approach. We are, as I said, mandating these to be imposed. We are allowing them to be a noncash collateral, and we said they should be commensurate with risk. The opposition argument is never. There will never be such a thing. There are no imprudent end users. There is no need ever to have them. The failure of trades in an individual case can be a problem for an individual company. They can cumulate. And that is the question: Do we say that we are willing to go forward with this issue with no power in any regulator to say that particular trades are being conducted in an imprudent fashion? Because if they are conducted in an imprudent fashion, there is no power here because any margin requirement must be commensurate with risk. We have stricken the notion. The gentleman from Minnesota raised that point. There was at some point some language that we had that said it had to be greater than zero. We said, no, it does not have to be greater than zero, it is commensurate with risk. And that is the issue. We are being asked to say we have complete confidence that there will never be the kind of imprudent trades that could begin to cause trouble in the system, and therefore, we will deny the regulators the power even to consider this. I yield back the balance of my time.

Mr. FRANK of Massachusetts. Madam Chair, I now yield 2\1/2\ minutes to one of the strongest advocates of fairness and equity, and critics of lack of action to stop the foreclosure process, the gentlewoman from California, the Chair of the Housing Subcommittee, Ms. Waters.

Mr. FRANK of Massachusetts. Madam Chair, I yield myself just 10 seconds to say that one of the Members whose business experience and general good judgment has been a very major asset for us is that of the gentlewoman from Illinois (Ms. Bean). She has had a very significant and positive impact on this bill. I will now yield her 2 minutes.

Mr. FRANK of Massachusetts. I support the amendment, but I do have to comment on this job issue. Once again, it is clear that January 21, 2009, saw a mass disease outbreak--prolonged, profound Republican amnesia. The gentleman from Texas says, under this administration, we've lost jobs. Yes. The Obama recovery from the Bush recession has been slower than we had hoped, but it has begun. According to the official National Bureau of Economic Research, the Bush recession began in 2007. Large job losses happened under the Bush administration and as a continuation of the Bush policies. We have finally begun to slow down the job loss. The notion that it is because our economic recovery plan was passed that job loss has continued is, of course, economic illiteracy of the highest sort. The problem is that you do not immediately turn things around. Most economic analysts agree that the economic recovery program has slowed down the rate of job loss, and we have begun to turn it around. When the gentleman from Texas and other Republicans blame Obama for the Bush mistakes, it's not going to be allowed to go unrebutted.

Mr. FRANK of Massachusetts. I yield 2 minutes to the gentlewoman from Ohio (Ms. Kilroy), a very diligent member of the committee.

Mr. FRANK of Massachusetts. I sympathize with the loss my Republican colleagues feel that we don't give a bailout for them, but this bill clearly repudiates it. First, they just today, as they did yesterday, made an issue out of the fact that we do include some bankruptcy, but their whole issue was bankruptcy. As the gentleman from Colorado said, there is nothing in their bill that prevents this from being extended ad infinitum under bankruptcy. Technically, we do have some time limitations, but that's part of bankruptcy. Here is what we do say. If, in fact, the FDIC would decide with a failed institution to keep it going, it would do it without any funds. On page 397, there is established a separate fund to facilitate and provide for the orderly and complete dissolution of any failed financial company that poses a taxpayer threat. Page 399, the fund shall be available to cover the costs incurred by the corporation as a receiver, repay such funds, cover the cost of systematic stabilization actions, not for the entity. Then in 288, the corporation, such action--they shall only get involved if they think it's--they can only spend the money if it is necessary for the purpose of financial stability and not for the purpose of preserving the covered financial company. Yes, we are saying that in some cases, in a very complex institution, you may not be able to wipe it out in a year. That's what was pointed it to us. If you wiped it out prematurely, you may find yourself costing more money, not to the institution, in severance pay and other things for employees. This is very clear. By the way, as to the permanence of this, the authority to borrow here is sunsetted in 2013. Yes, there will be a fund of assessment from private financial institutions. I know the Republicans do not want us to discommode the major financial institutions for this. We levy on them for money that can be used. If a major institution fails, then the money can be used to manage that failure in a reasonable way. The biggest difference is that we try to stop the failure and they do nothing to try to stop it.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Chairman, I yield back the balance of my time.

Mr. FRANK of Massachusetts. Mr. Chairman, I would just take this opportunity to announce if there are any Members here who think we are going to do any further business, that we're not. We will resume tomorrow morning. I will inform the Members as a result of what we have been able to do with some of the manager's amendments and this en blocing, and I appreciate the cooperation of the gentleman from Texas and others, we have, I believe, 11 amendments left to be offered tomorrow. Two of them will take a longer time, one on the CFPA, the Consumer Financial Protection Agency; one on the Republican substitute; and then there will be a recommit. So we should be, obviously, finishing this bill sometime early tomorrow afternoon. We will come back in tomorrow and resume the debate, and I wanted Members to know that.

Mr. FRANK of Massachusetts. Mr. Chairman, I move that the Committee do now rise.

Mr. FRANK of Massachusetts. I yield 2 minutes to the gentleman from New York (Mr. Murphy), the author of one of the amendments.

Mr. FRANK of Massachusetts. I reserve the balance of my time.

Mr. FRANK of Massachusetts. Mr. Chairman, these are 10 amendments that raise in merit from wonderful to at least acceptable, and I will be reserving the balance of my time; and I will yield time, or they can get their own time, to any one of the offerers who wishes to explain his or her amendment. I reserve the balance of my time.

Mr. FRANK of Massachusetts. Mr. Chairman, pursuant to the authority granted to me under the rule, I offer amendments en bloc.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. I yield back the balance of my time.

Mr. FRANK of Massachusetts. I yield myself such time as I may consume. First, I have to deal with some of the misstatements that we've heard. There is nothing in here that rations credit. There isn't even anything to refute because there is nothing here they could even misinterpret, Madam Chair, about the rationing of credit. Now, some are particularly upset because we establish a Consumer Protection Agency. In the first place, as far as the banks are concerned, that entity gets no new powers; it takes powers that are already there in the bank's regulators that haven't been used very well. If my friends on the other side want to go to the American people and say, oh, great, here's one of the differences between the parties, we think you consumers have been very adequately protected, and you don't need to improve that manner of administration, then I will take that debate to the American public. They tell us that this is bad for small business. The Independent Community Bankers Association supports this bill. They will be unhappy if bankruptcy is added, I understand that, but as far as the bill now stands, before we get to the bankruptcy clause of the Judiciary Committee amendment--which I'm going to vote for, but insofar as the accusation that it restricts credit, the Independent Community Bankers don't think so, just as when we did the credit card bill and the Republicans said--some of them, some of them voted for it--this is bad for small business and the National Federation of Independent Business said no. What we say here is--and this is a big difference--we do say that we want to prevent the granting of those kinds of mortgages that get people in trouble because it's not just the individual who gets in trouble; the whole economy suffers. And we do want to ban the kind of practices in the mortgage area--so it's true, it's an expansion of government power. I will say, by the way, that was a constant debate. For much of the past, oh, 15 years, until recently, many Democrats tried to get restrictions on irresponsible subprime mortgages. The Republicans resisted them. From 1995 to 2007, my Republican friends controlled this House; not a piece of legislation passed to stop mortgages, not a piece of legislation passed to deal with Fannie Mae and Freddie Mac. We did, in 2007, pass such legislation, but the damage had been done. So, yeah, there is a difference. We want to expand the regulatory power to stop the kind of mortgages from being granted that were a major problem in the crisis. One Member said, Well, we would do nothing to stop the AIG crisis. No, we do many things to stop the AIG crisis. First of all, we do not allow, under the legislation we are putting forward, an entity like AIG to get so overextended by issuing credit default swaps that they can't pay off. They would be restricted because derivatives would be better regulated. They would be restricted because they would not be allowed to be so leveraged because we would give regulators the power to hold them in. The notion that it's socialism when you have bank regulation is quite odd. We heard Members say this is socialism. There is nothing in here about the ownership of the means of production. There is nothing in here about the government taking over any ongoing institution. Yes, we have bank regulation, and that's the deal. These are people who think that regulation is socialism. We are for regulation. We do believe that the absence of regulation over the last 20 years contributed greatly to this problem. Now, I know there are people who say, when you start regulating the innovation aspects of the economy, you get into trouble. They said it about Franklin Roosevelt and the Securities Exchange Commission, they said it about Theodore Roosevelt and antitrust. I urge people to go back and read the same old arguments. Now, the gentleman from Texas (Mr. Neugebauer) said the Federal Reserve will decide that you are too big to fail and you will be advantaged; wrong, wrong, wrong. In the first place, the designation that an entity, a financial entity--by the way, we heard some comments about Dell and American Airlines, which are not covered under this bill. They are not financial holding companies and could not be made financial holding companies. So Dell and American Airlines are total red herrings. What we have here is the ability of a group of the existing regulators--not the Federal Reserve--to decide that a particular institution is so big and so overleveraged that it's a danger. But they don't get designated and then carried around; coordinated with that is a restriction on what they do. They are not told you're too big to fail, go out and make more money. They are told, you are so big that if you fail because of problems, raise your capital, cut back on your activity, and if you're AIG, stop selling the credit default swaps. There is this very real difference between the bills. Their bill is very small because it does nothing to retard the kind of activity that got us in trouble. It does not stop over-leveraging, it does not stop unregulated derivative trading, it does not stop credit default swaps without anything to back them up, it does not stop any subprime lending abuses. So yes, that's their view, and they're very clear: Leave it to the private market. We say the private market always does better with sensible regulation. When Roosevelt and Wilson put antitrust into place, I think they did a good thing. When Franklin Roosevelt did the SEC and the Investment Company Act, those were good things. So, yes, a lack of regulation we believe did cause this great problem. Now, we get into the bailout issue because the Judiciary Committee, frankly, copied the Republican bill by saying you should use chapter 11. The Republican bill talks about chapter 14--the equivalent of chapter 11 here. Here's what, however, the Judiciary language is subject to. It is subject to--we are talking about now the fund. Yes, somebody could be put into chapter 11, but none of the money could be spent that's in the fund. It's raised not by taxpayers, but by an assessment. On page 399, ``The Fund shall be available to the corporation for use with respect to the dissolution of a covered financial company to cover the costs incurred by the corporation. The Fund shall not be used in any manner to benefit any officer or director of such company.'' It also then says, on page 397, here is the fund, this is the purpose of the fund, ``to facilitate and provide for the orderly and complete dissolution of any failed financial company or companies that pose a systemic threat to the financial markets or economy as determined under 1603(b).'' The language about Judiciary does not alter that in any respect. It says that the Fund can only be used for dissolution. Now, it is true, they said, well, what about AIG when they paid off all these people? This is precisely to prevent the repetition. That was done, by the way, as Members will know, under section 13(3). It can no longer be done. We have changed section 13(3), so that should not happen again. What they did was to say--and this was in the Bush administration-- they said, look, we don't have the discretion to pick and choose, so we are doing exactly the opposite of AIG. With AIG, it was the ruling of the Bush administration's top officials, concurred in by President Bush without any congressional input, that they had to pay off every creditor of AIG because they got the legal authority to pick and choose. They said, we can put them all into bankruptcy, we have Lehman Brothers, and the markets will end--Secretary Paulsen said--or we can pay everybody. We give them the authority precisely to avoid that dilemma. And by the way, AIG was not being put out of business. It is not AIG. AIG was not put under dissolution; they are being kept going. That could not happen. What we say is, in the future, if you think an entity like AIG has gotten too big and owes too many people too much money, you take it over and you spend money only to wind it down and to dissolve it. If there was some notion that it could be kept going, then none of these monies could be used for it. Let me read it again: ``To facilitate and provide for the orderly and complete dissolution of any failed financial company.'' That is a restriction on the use of the fund--it's not a taxpayer fund, but even of the other funds. And then on page 288 it says, ``The Corporation is authorized to take the stabilization actions''--including the bankruptcy--``only if the Secretary and the Corporation determine that it is necessary for the purpose of financial stability and not for the purpose of preserving the covered financial company.'' And it then says, ``The Corporation ensures that any funds from taxpayers shall be repaid as part of the resolution process before payments are made to creditors.'' Funds will be repaid if there is a borrowing. Funds go to the taxpayer before a nickel goes to the creditors. These are the inaccuracies that we have heard. There is no Dell or American Airlines in here. Oh, by the way, there is no permanent bailout fund either because that fund and the borrowing authority the gentleman from New Jersey talks about sunsets in 2013. The borrowing authority is sunsetted at 2013. So permanent is true if you believe that the world is ending on January 1, 2014. Now, I know the Republicans believe the world began on January 21, 2009, and all the bad things that happened never happened under Bush--they didn't fail to vote for them. They all happened in 2009. Again, as my partner said to me, that was also the day of a terrible, terrible disease outbreak, mass Republican amnesia on January 21, 2009, when they forgot what all these--We've heard talk about job losses. Isn't it interesting that the gentleman from Texas cannot remember that a single job was lost before January 20. He talks about the job losses since the stimulus bill was passed. In fact, this recession, the worst since the Depression, began in 2007, in December; and there was enormous job loss under President Bush. Job loss has diminished recently. So, yes, I will acknowledge that the Obama recovery from the Bush recession has been slower than we would have liked. But every sensible economist understands that the question is not whether there were any job losses at all, or whether you have affected the rate. And clearly the economic recovery plan has affected the rate. And further things will affect it further. I yield to my friend from North Carolina.