Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Yes. I will reclaim my time to say that the gentleman has just reaffirmed what I said. I said it was the during the Bush administration. I just reclaimed my time. Do Members not understand the rules on the other side? I yielded twice. I reclaimed my time, Mr. Speaker.

Mr. FRANK of Massachusetts. I thank the gentleman. I will use it and then reserve the balance of my time. I was not a member of the conference committee. The Financial Services Committee was not directly involved in this. We were more constrained by what we thought was the germaneness to the recovery bill. So the answer is I am not familiar with whatever the reasons were as to why this was put in. I will say this: If there had been no language whatsoever, we still wouldn't have had the authority. In other words, what did survive was additional authority. Now, if there had been no bill whatsoever, we wouldn't have come even this close. But as to the specific question, the answer is I was not involved. I would also just say, as chairman of the Financial Services Committee, I monitor pretty closely what goes on. I am not aware of any Republican member of the Financial Services Committee who has approached us and asked us to toughen up compensation restrictions. This interest in compensation restrictions is a fairly new interest. I commend people. I think later in life, it's good to take up new things so you don't get stale. But I do want to note that it is a fairly newfound hobby of my colleagues on the other side. In fact, in September when the Bush administration said they were going to make the loan with no restrictions and we pushed for it----

Mr. FRANK of Massachusetts. No, I'm sorry. I will yield to talk about what I am talking about. I take back my time.

Mr. FRANK of Massachusetts. I yield myself such time as I may consume to say I learn a lot in this job. Now, I have learned about a theory called creationism which in some cases holds that the world was created 4,000 years ago or 7,000 years ago by calculating what the Bible said. But I now am astounded to see a new and more compressed theory of when the world was created. It apparently was created at noon on January 20, 2009. You just heard someone say, ``it is Obama's fault.'' In September of 2008--and I regret that we are getting into this kind of political discussion--but the gentleman from Alabama raised it. In September of 2008, two appointees of George Bush came to the Congress and said, Mr. Bernanke, the Chairman of the Federal Reserve, who had previously been on the Bush economic advisory staff, and Mr. Paulson, the Secretary of the Treasury, and they said, ``we are going to lend $85 billion through the Federal Reserve to AIG.'' They didn't ask us.

Mr. FRANK of Massachusetts. Yes.

Mr. FRANK of Massachusetts. Mr. Speaker, please instruct someone who should know better about the rules. I took back my time. The point is this: He had the chance to make his argument. He wanted to make it political. Yeah, there was something in the stimulus package. Before the stimulus package, there was September of 2008. It does exist. Your revisionism doesn't work. I would say to my friends on the other side, Mr. Speaker, in September--I note, Mr. Speaker, how sensitive the subject is that I raised. I got one sentence into describing the role of the Bush administration, and up comes my colleague from Alabama, because they don't want this to be discussed. In September of 2008, George Bush's two top economic appointees came, and Mr. Bernanke informed us that he was going to lend $85 billion to AIG. I said, at the time, because he said ``we have obligations all over the world here, and we have to make our foreign partners know that this is not going to be a default on them.'' I said, ``well, are they contributing?'' I asked them at the time, ``will there be any contribution from foreign banks to make up what AIG owes?'' The answer was ``no.'' So from September of 2008 until January 20, 2009, the Bush administration was in charge of this.

Mr. FRANK of Massachusetts. Mr. Speaker, we have passed from creationism to fantasy. It's interesting. The gentleman from Texas (Mr. Gohmert) was very critical, in fact, of the actions of the Republican leader. He said we begged people not to vote for the TARP. The Republican leader in the House last fall worked very hard to get it passed. So did the other members of his leadership. So did the other Members of his leadership, and now he is being denounced for that. So I guess he broke even on his side, which these days, if you are in the minority, may be a pretty good day. But the fact is this, the gentleman from New Jersey says, well, the Democrats were in the majority--though he said Democrat majority. Pardon me, for not getting his inflection absolute. Yes, the President of the United States, George Bush, came and asked us to do this, and his two top economic advisers said if you don't do it, there will be a crisis. But, in fact, that's not directly relevant to the AIG issue. AIG was granted money. And, by the way, the gentleman from New Jersey again misstates the relevant statute. The statute that we are referring to, that the gentleman from Texas referred to, is not the original one creating the Federal Reserve, it's the 1932 statute that gave them the power to lend money as they wish, signed by another great Republican President, Herbert Hoover. But the point is that it was the Republican administration that said we had to do this. Yes, there was cooperation, the Republican leadership in the House, the majority in the Senate, believing that there would have been a terrible problem if it wasn't there. I do want to reiterate that I am now pleased, as Chairman of the Financial Services Committee, that there is this interest on the Republican side in restricting compensation. It has not previously been a strong part of their argument. However, we will return to the subject of this resolution. The resolution isn't binding, but it is a forerunner of what will be binding. The Committee on Financial Services will vote next week on binding legislation, and it will bring it to the floor the week after, which will embody much of this, and it will include an effort to deal with this retroactively. There will be legal questions raised, but the fact is that we will have binding legislation to embody this. This is an important statement. I would say this in closing, Mr. Speaker. We have people now at AIG deciding whether or not they are going to give their money back. The more they give back to us, the better we will be. It won't be totally conclusive. But to defeat this resolution because it says nice things about President Obama would be a grave error.

Mr. FRANK of Massachusetts. Reclaiming my time, we now have the nub of it. How dare I mention September of 2008. We're talking about February. I thought the world began on January 20. Apparently it started on February 1. The fact is that you cannot look at this out of context. It was under the Bush administration that they initiated this loan to AIG. It was under the Bush administration that they asked for TARP and for our efforts to try to restrict compensation.

Mr. FRANK of Massachusetts. Mr. Speaker, I move to suspend the rules and agree to the concurrent resolution (H. Con. Res. 76) expressing the sense of the Congress regarding executive and employee bonuses paid by AIG and other companies assisted with taxpayer funds provided under the Troubled Assets Relief Program of the Secretary of the Treasury.

Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, there is a great deal of anger in the Nation, and it is reflected in this House, which is representative of the Nation, about retention bonuses given to people who worked at AIG. Retention bonuses in this situation, Mr. Speaker, strike me as a form of legalized extortion. These are not performance bonuses. I was unclear about that and misspoke about it to some extent. These are bonuses paid solely so that people who had been employed at AIG would not leave AIG as it became clear the company was in trouble. Specifically, we were told that these retention bonuses go to employees who were engaged in complex financial transactions. Now it is, in sum, these complex financial transactions that caused the company the problem. The insurance entities, regulated by State insurance regulators, caused no problem. In fact, they generated the resources and the revenues that allowed these other people to get themselves in trouble. According to Mr. Liddy, who was appointed to head AIG after the failure, a decision was initiated by the Federal Reserve last September to lend them money and then make a change in the company's management. Mr. Liddy said he was afraid--and he is genuinely sincere about this-- he was afraid that some of these people who had been working at the company and who had intimate knowledge of these complex transactions would leave the company and might, in fact, even use their knowledge in ways that would be adverse to the company. That is a very sad commentary on them. These are people who were engaged in these transactions, the effect of which was to put the company in trouble. And we are told that they have to be bribed not to abandon the company in their time of trouble. Now, I am skeptical that the best way to get out of the hole that those people dug was to let them get extra pay for wielding the shovel. I believe there could have been other people hired. My colleague, Mr. Capuano, did some good questioning in this. We were told AIG felt, no, they had to pay the bonus. I think that is a very grave error. My own preference is, and I have urged this on the administration, my preference is that they bring a lawsuit on behalf of the U.S. as the major shareholder so that we can recover here; that is, it is not a case of us as a regulator intruding on a contract by others. This is a case where we are the major owners of this company. And I believe that it is a grave error to enrich people who have apparently threatened to leave the company, abandon it and not help them get out of the problems they created unless they are given these bribes called ``retention bonuses.'' We have a resolution here which talks about several things. First, it does express our determination to prevent these from happening in the future. We have already done some of that. We should note, this provision here, this decision was made unilaterally by the Federal Reserve system under a 1932 statute. There was no congressional input whatsoever into the decision last September to do this. The Secretary of the Treasury, Mr. Paulson, accompanied me, the chairman of the Federal Reserve, Mr. Bernanke, and they came to Congress, and they said that Mr. Bernanke had decided to give a loan of $85 billion to this company. No restrictions were put on the company. Two days later, the same two gentlemen asked us to enact legislation providing for $700 billion in authority. At that point, we said, among other things, there has to be some restrictions on the compensation paid. Now we didn't get all the restrictions we wanted because we were in the negotiation process. But it was instructive that when the Fed did it on its own with the Secretary of the Treasury's support, there were no restrictions on compensation. Two days later, we immediately raised that, had a debate and got some of them. Now, we have gone further. I would make this contrast. We have AIG without any restrictions. Under the TARP program, which Congress voted and which is now being administered by the current administration, we have not only imposed restrictions, we are now being criticized in the press and by some of the recipients for being too tough on them. In the New York Times last week, there was a front page article that said the banks are going to have to give the money back because we are too tough on compensation, lavish entertaining and too much pressure to make loans. There was an article in the Washington Post business section 3 days ago making the same point. I welcome that kind of criticism. I welcome the recognition that we have now become very tough. The problem is that these bonuses were granted under an authority that the Federal Reserve gave before Congress got into the situation and were able to put on the restrictions. This resolution is a beginning of what we will be doing. There is also, I hope, going to be a lawsuit. I have been pressing the administration for a shareholders' lawsuit to recover the bonuses that have already been paid. And there will be other legislative vehicles. I hope that the Committee on Financial Services will mark up a bill next week which will embody much of what is in this resolution. We will have a markup in committee. I hope we will be able to bring a bill to the floor that will deal with this both prospectively and retroactively. At this point, this is a statement of intention which I think is appropriate because people in this country want to know what we are doing. It will be followed up by a markup in committee. We have had several hearings on the subject of compensation and a big one on AIG, obviously, yesterday. And we will have another AIG hearing next week with the Secretary of the Treasury and the Chairman of the Federal Reserve. But we will be marking up legislation next week in committee and voting on it the final week before the recess so that what we state here as our intention I hope will become law. I reserve the balance of my time.

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

Mr. FRANK of Massachusetts. Mr. Speaker, I continue to reserve the balance of my time.

Mr. FRANK of Massachusetts. I yield to the gentleman from Alabama.

Mr. FRANK of Massachusetts. Well, Mr. Speaker, I would say to my friend from Ohio that last remark was kind of bewildering. It wasn't my time. He was out of time. He seemed to be annoyed that I hadn't answered his question, but how I don't know how I could have done that except by sign language, in which I am not proficient. In my time I will address the question. For him to ask me a question as his time expires and then express indignation at my failure to answer it puzzles me. Mr. Speaker, I reserve the balance of my time.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Madam Speaker, on Sunday, March 8th, I had the privilege of addressing one of the most worthwhile organizations in the district that I am privileged to represent--CAN- DO. Led by Josephine McNeil, CAN-DO does extraordinarily important work in trying to get affordable housing of various sorts--rental, ownership, group homes--placed in the City of Newton, where I live. This requires a great deal of work, both in compiling together the finances at a time when money was not adequate for these purposes, and in dealing with neighborhood resistance which generally turns out to have been unjustified, but which was nonetheless strong in some cases. In addition to being able at that event to praise the work of Josephine McNeil, I had the chance to share the evening's speaking program with Steven Gartrell, who is just retiring as Director of the Housing and Community Development program in the City of Newton. He won the YIMBY Award from the organization: the ``Yes, In My Back Yard!'' honor. As the Community Development Director for the City of Newton for many years, Steve Gartrell exemplified public service that was compassionate and responsible. Under his leadership, serving several mayors, the city spent its community development block grant money wisely and well. Steve Gartrell did the most good that it was possible to do with the funds made available to him from the federal government. I am glad to be able to point to the expenditure of community development funds under Mr. Gartrell as an example of how government at the federal level can best enable good work at the local level, and I congratulate Steve Gartrell for this well-deserved award, and Josephine McNeil for recognizing him by granting it.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Madam Speaker, after 25 years of extraordinary service in the WIC Program, Mary Kelligrew Kassler is retiring. I know literally no one who has worked harder to make this the kind of country that we all want to live in. Her dedication to providing needed assistance at the critical time in their lives to lower-income women and their children is unsurpassed. I will personally miss her as a source of absolutely reliable advice in this area. She combined a zeal for the important work she was doing with a balanced outlook and a realistic understanding of how to get things done that made her an advisor on whom I could always rely without any question. For 25 years Mary Kelligrew Kassler has exemplified public service in a critical area. Madam Speaker, I hope that young people contemplating careers will learn about the extraordinary work she did and that she will be, at least for some, a role model.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I rise to oppose the motion to recommit.

Mr. FRANK of Massachusetts. Mr. Speaker, on that I demand the yeas and nays.

Mr. FRANK of Massachusetts. Mr. Speaker, before turning to this motion to recommit, I have a serious subject I want to address. A number of Members have been concerned about the increased assessment that's hit community banks from the FDIC, in part because of failures to which they did not contribute. Today, the Chair of the FDIC, Sheila Bair, has written to our Senate counterparts to say that in effect, if we go ahead with the increase in FDIC borrowing authority--some of that is in this bill; it would be improved on in the Senate in ways that we agree with--but if she gets the increased borrowing authority, a process that begins in this bill, she will substantially reduce that assessment on the community banks. So voting for this bill will be an important step towards reducing the assessment of the community banks. I insert this letter into the Record at this point. Federal Deposit Insurance Corporation, Washington, DC, March 5, 2009. Hon. Christopher J. Dodd, Chairman, Committee on Banking, Housing, and Urban Affairs U.S. Senate, Washington, DC. Dear Mr. Chairman: I am writing to express my support for the Depositor Protection Act of 2009, legislation to increase the Federal Deposit Insurance Corporation's borrowing authority with the Treasury Department if losses from failed financial institutions exceed the industry funded resources of the Deposit Insurance Fund (DIF). As you know, the FDIC's borrowing authority was set in 1991 at $30 billion and has not been raised since that date. Assets in the banking industry have tripled since 1991, from $4.5 trillion to $13.6 trillion. As I indicated in my previous letter of January 26, 2009, the FDIC believes it is prudent to adjust the statutory line of credit proportionately to leave no doubt that the FDIC can immediately access the necessary resources to resolve failing banks and provide timely protection to insured depositors. The legislation would include important additional authority for the FDIC and would rationalize the FDIC's current borrowing authority. Under current law, the FDIC has the authority to borrow up to $30 billion from Treasury to cover losses incurred in insuring deposits up to $100,000. In addition, when Congress temporarily increased deposit insurance coverage to $250,000, it temporarily lifted all limits on the FDIC's borrowing authority to implement the new deposit insurance obligation. The bill would permanently increase the FDIC's authority to borrow from Treasury from $30 billion to $100 billion. In addition the bill also would temporarily authorize an increase in that borrowing authority above $100 billion (but not to exceed $500 billion) based on a process that would require the concurrence of the FDIC, the Federal Reserve Board, and the Treasury Department, in consultation with the President. Because the existing borrowing authority for losses from bank failures provides a thin margin of error, it was necessary for the FDIC recently to impose increased assessments on the banking industry. These assessments will have a significant impact on insured financial institutions, particularly during a financial crisis and recession when banks must be a critical source of credit to the economy. The size of the special assessment reflected the FDIC's responsibility to maintain adequate resources to cover unforeseen losses. Increased borrowing authority, however, would give the FDIC flexibility to reduce the size of the recent special assessment, while still maintaining assessments at a level that supports the DIF with industry funding. While the industry would still pay assessments to the DIF to cover projected losses and rebuild the Fund over time, a lower special assessment would mitigate the impact on banks at a time when they need to serve their communities and revitalize the economy. In conclusion, the Depositor Protection Act would leave no doubt that the FDIC will have the resources necessary to address future contingencies and seamlessly fulfill the government's commitment to protect insured depositors against loss. I strongly support this legislation and look forward to working with you to enact it into law. Sincerely, Sheila C. Bair. Now, as to the motion to recommit, the gentleman from Georgia slightly under-described his amendment. Understatement is not his usual metier, but he alluded to it today. He said it would prevent, as I recall page 3, section C, help for any irresponsible borrower. No. It prevents mortgage assistance to any borrower, responsible or not, no matter what the cause. This proposal simply makes it impossible to carry out any mortgage relief. One of the things that the President said was we would go to the servicers who now can get a payment for foreclosure. And we would say under this bill, we would authorize a payment if they did a modification instead of a foreclosure. This amendment says no, that can't happen. We say here that we will work with the borrowers to reduce the amount that they are entitled to receive under the contract on the grounds that they would be better off avoiding foreclosure. It would have the Federal Government work with them in this. This would make it impossible. The gentleman from Georgia kind of made clear his general position when he began by denouncing the part of this bill that deals with bankruptcy. Now, of course, this amendment, as he's offered it, doesn't deal with bankruptcy. That's why I'm here instead of my colleague from Michigan. But the purpose is clear. His view is that there should not be a Federal program to try to diminish mortgage foreclosures. Here is the point. Diminution of mortgage foreclosures currently has a compassionate aspect. Not surprisingly, that has less appeal in some parts of this House than others. But there is also an enlightened self- interest to it. Irresponsible subprime mortgage lending and borrowing and underwriting and securitizing a whole lot of guilty parties was the biggest single cause of the financial crisis we are in. The continued cascade of foreclosures and consequent deterioration of asset prices is the major reason why we have continued economic deterioration. There is broad agreement that until we begin to stem the tide of foreclosures--we can't stop it all, and we're not trying to stop it all; not everybody who's being foreclosed upon can be helped or should be helped--but until we do a great deal to reduce this, you will not get an end to the current crisis. So this is a direct shot. Now, I know I do not attribute this to the gentleman from Georgia, but there is, for instance, a noted commentator on public affairs, Mr. Limbaugh, who has a certain number of fans on that side--and if they aren't fans, they're afraid to say so. He has asked that the President fail. Well, the effect of this amendment would be giving Mr. Limbaugh his wish because if you cripple the effort to reduce mortgage foreclosure, you cripple the effort to get out of the economic slump we are in. So I understand what some people would like to see happen. They do not want President Obama and a Democratic Congress to get any credit for helping to reduce our economic situation. I understand that, but they're taking a lot of innocent people hostage. They have a right to be very partisan and go after us. But don't do it at the expense of an awful lot of Americans who would lose their homes and of an economic situation that is deteriorating. So I reiterate that defeating this motion and passing this bill will be an important step towards, among other things, reducing those FDIC assessments--and we have the word of Sheila Bair--and it will be a responsible way of trying to reduce mortgage foreclosure. It's to the benefit of the individual, to the benefit of the communities that are suffering from this, it's to the benefit of other homeowners whose property values have deteriorated by foreclosure; and at last, I must concede to my Republican friends, it might help the President in his effort to improve the economy. I apologize for that, but I hope you can put up with it.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Then I would make a unanimous consent request that the gentlewoman from West Virginia be able to conclude her remarks as if the amendment had not been withdrawn.

Mr. FRANK of Massachusetts. I thank the gentlewoman for yielding. Mr. Chair, I think her amendment is a very important one. I would ask her if we could withhold further action to do a little work on it because the notion that we should put a requirement on these servicers to get funding is a valid one. There are some interconnections here, and I think we could actually make it apply to more people. But, also, if a servicer is only doing two or three of these, the requirement that they notify everybody might become a deterrent to doing some. So I would like to sharpen it and broaden it at the same time. And if the gentlewoman would agree, we could work on this, and I think by the time this gets through the Senate, never known for breakneck speed, we would have a version that would improve it. So I would suggest that to the gentlewoman.

Mr. FRANK of Massachusetts. Mr. Chairman, it was not our intention to shut off the gentlewoman from West Virginia. Is it in order to ask unanimous consent that she be allowed the remaining time as if it had not been withdrawn?

Mr. FRANK of Massachusetts

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

Mr. FRANK of Massachusetts. Mr. Chairman, in the absence of any correction, I have only one speaker left; so I will reserve the balance of my time.

Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 10 seconds. The gentleman from Georgia asked about what other contracts. This is precisely the bill to make this like other contracts. Everything else can be declared void in bankruptcy. So the gentleman has it absolutely backwards. This doesn't create an exception to general contract law. It amends one and makes this on the same footing as, quoting the gentleman, all other contracts.