John Garamendi

Mr. GARAMENDI

Mr. GARAMENDI. So ultimately we wound up with a situation in which the financial industry had set up a scheme to sell mortgages to people who couldn't possibly pay those mortgages over time. They were often sold with teaser rates, low interest rates for a year or two, and then it reset to a much higher rate so the payments would be impossible to make at that point. Then they took those products, those individual mortgages, put them all together and repackaged them into this magnificent tower of----

Mr. GARAMENDI. Well, there's been some very good work done, but the job is not finished. We're seeing a stabilization of the American economy. We've got a long, long way to go. One major piece of that is the work that is now going on in the U.S. Senate. I beg them to send us back here to Congress a very strong regulatory bill on Wall Street. Rein in the excesses. Provide the transparency so that everyone can see exactly what the product is and how the game is being played. Push the derivatives out of the bank business so that that's all separate; the collateralized debt obligations, transparent. Regulate it. Regulate the derivatives, and make sure that we never get back into this again. Maybe in the next month or so we will finish this critical piece of work. It's, hopefully, going to be done with the support of the Republicans. We know that for a long time they tried to stall it here in Congress, but, fortunately, the Democrats were able to put our bill out, send it over to the Senate. Now, with the Republicans in the Senate backing away from their support of Wall Street, hopefully, we'll get that bill over here; we'll finish this job and do what is absolutely necessary for the American economy and, indeed, for the world's economy. So, with that, let's let this night pass and we'll get back to work tomorrow morning.

Mr. GARAMENDI. And part of that Consumer Protection Agency focuses directly on the mortgage market out there and deals with those mortgage companies that were selling subprime mortgage opportunities to people that had really no ability to pay it back. So those people may have invested whatever money they had in a home, and when it came time for the resetting of the interest rates, they couldn't afford it. They lost their investment. They lost their home. They may have also lost their job because of the collapse of the mortgage industry and the housing industry, and so 8 million Americans were out of work. And as both of you have very, very well described, the situation in which those Americans that may still have their job may very well have lost a good portion of their pension either directly through Lehman Brothers' collapse or through the crash of the stock market. The combination wiped out 401(k)s. The word around was they no longer were 401(k)s, they had become 201(k)s. So we really need to have that consumer protection agency in place to monitor Wall Street, to monitor the mortgage lending markets out there, to make sure those products are appropriate for individuals. Without it, we are going to go right back into the same kind of problem that nearly took down this country's economy and the world economy. Ms. Speier, it looks as though you want to add another element to this discussion about what the law should be.

Mr. GARAMENDI. If you would like to wrap this up from the perspective of Ohio, one of the States hardest hit for many, many years now, but a State that's coming back with leadership such as yours.

Mr. GARAMENDI. The statistics are really frightening in what has happened with Wall Street. If you take a look, what is really happening is Wall Street is not making loans, and many of the small banks, the community banks, don't have the capital to make the loans, so the capital is being tied up in these huge banks. So what we are really looking to do as part of this reform is to push the capital down to the local banks, down to the Main Street banks, so that they can make loans to people. However, if you take a look at the large banks, the leading United States banks in 2009, they reduced the number of loans that they made by 7.4 percent. It was the steepest drop in lending by the large banks since 1942, and that was the beginning of World War II. The 22 firms that received the most bailout money, this is the Wall Street bailout money, cut small business loans by $12 billion in 2009. Meanwhile, and this was the point you were making a moment ago, the top 38 largest financial firms gave out $145 billion in record pay to their employees in 2009. That was an 18 percent increase from 2008, which was also a very high year. So what is happening here is that Wall Street's philosophy seems to be all about greed for them and poverty for the rest of the Nation. That has got to end. What we need is this reform of Wall Street. We need to put in place very clear rules: No more games with derivatives. If you are a banker, you are a banker. You are not a loan shark on the street selling a bad loan. You are a banker. You are to take deposits. You are to make loans that are sound and secure, and make those loans on Main Street, not to another Wall Street shark. So what we want to do is take the derivatives out of the banking business. If somebody wants to play the games of a gambler, they are not going to gamble with taxpayers money. They are not going to gamble with depositors money. They are going to have to do that separate and apart from banking. Fortunately, the Senate bill seems to be moving in that direction. So when it passes the Senate and comes back to the House in a conference committee, I really want to see derivatives out of the banking business. Let them be handled by Wall Street firms that are not banks. If they want to play the game, let them play the game there. I think that will make a difference back in Main Street, back in Concord and Walnut Creek in my district.

Mr. GARAMENDI. We were not in Congress when they passed that terrible piece of legislation.

Mr. GARAMENDI

Mr. GARAMENDI. Mr. Speaker, I think we just heard something that is only a half truth. I was meeting with the realtors in my district a week or 2 weeks ago, and they had read all of this propaganda from the Republican Party. They said, ``Well, we cannot afford to buy insurance.'' I asked, ``Are you buying it now?'' ``Yes, we are.'' I said, ``Are you aware there is up to a 50 percent tax credit for every insurance policy that you buy?'' ``No, we didn't know that.'' ``Are you also aware that if you have a child who is 23 who would drop off your insurance, they will be able to stay on your insurance until they are 26?'' ``No, we didn't know that.'' ``How about the cap on the yearly expenditures and the lifetime cap, do you realize that there will be no cap, whatever you need, you will be able to have it paid for by insurance?'' ``We didn't know that.'' ``And you're a senior; did you know that there is a $250 immediate tax rebate if you are buying those drugs in that doughnut hole?'' ``We didn't know that.'' ``And in 3 years it disappears?'' ``We didn't know that. Well, then why do Republicans want to repeal all that? We don't understand. Why do the Republicans want to get rid of all that good stuff?''

Mr. GARAMENDI

Mr. GARAMENDI. Mr. Speaker, on this, the 62nd anniversary of the founding of Israel, I want to extend my warmest regards to the people of Israel and all those who made the Middle East's first democracy possible. In the wake of one of the most horrific crimes against humanity ever perpetrated, Jews from across the globe sought to form their own homeland, one that enshrined in their constitution `freedom of religion, conscience, language, education and culture.' President Harry Truman was the first international leader to recognize the state of Israel, and we've been proud allies ever since. In Israel, Americans can see much to be admired, and we share common goals and desires. We are both home to countless innovators, entrepreneurs, scholars, thinkers, activists, immigrants, and democrats. We both strive for peace and a more just and stable world. And we are both familiar with the hard trials, tribulations, and triumphs that come to define a people and a culture. Let's continue our strong and hopeful relationship as we work toward peace across the globe.

Mr. GARAMENDI

Mr. GARAMENDI. Now I'd like to turn to a colleague of mine whom I've had the pleasure of working with for many, many years. She was the chairperson of the California State Senate Banking and Finance Committee and now serves on the Financial Institutions Committee here in the United States Congress, the gentlewoman from the great State of California, Jackie Speier.

Mr. GARAMENDI. Thank you so very much for your good work on it. This is a very, very clear dichotomy about where we stand. Our friends in the Republican caucus opposed the job bills that were put forward last year, the stimulus bill. They opposed it. They opposed the unemployment insurance programs that would keep people with enough money to be able to continue to keep their home and provide food for people. They opposed efforts to curtail the excessive Wall Street bonuses; opposed creating a new consumer protection agency to rein in Wall Street; opposed the tax cuts for small businesses and working families; and opposed regulating Wall Street to prevent foreclosures. On the other side of the aisle, I proudly say that the Democrats in this House supported the jobs bill last year that created thousands of jobs, hundreds of thousands of jobs. We support the unemployment insurance extensions. We support the efforts to curtail excessive Wall Street bonuses. And we support creating a new consumer protection agency to watch over the excesses of Wall Street. And we supported the tax cuts for small businesses and for working families. And, finally, we support regulating Wall Street and preventing further foreclosures and meltdown of the economy. It's been a challenge. And it's been a very, very important time in America. We have seen the worst of it. We have seen things getting better. We have also seen greed to the excess. And that greed, unfortunately, is going to continue unless we get a strong financial regulation bill to the President. And I know that my Democratic colleagues and I want to see that happen, and we will do everything we possibly can.

Mr. GARAMENDI. Not true. I know that we had no votes from the other side of the aisle on taking $60 billion back from the big banks and giving it to students. We also just a week before that vote we had another vote up on the insurance industry, which you are so familiar with, and I know that I am. The health care reform was a major reform of the health insurance industry practices. No more discrimination against women, no more discrimination against people with preexisting conditions, and the freedom from fear of losing your job, losing your health insurance, and losing your life and your life savings. Those major insurance reforms were voted out of this House without one Republican vote--excuse me, there was one. One Republican voted for those reforms of the insurance practices to end health care discrimination. It's really interesting, bipartisanship not on the major issues where you are helping Main Street, not on the major issues of helping students, not on the issues of reforming the health insurance practices. On those kinds of things it's very, very clear where we stand on the Democratic side of the aisle. We stand for reform, reining in Wall Street, bringing into play serious restrictions on the ability of insurance companies, health insurance companies to discriminate against women and children and those with preexisting conditions. I know you have been there for many of these fights. And it's been a great pleasure to work with you on those. Perhaps it's time for us to wrap this up. And if you would like to kind of close, and then we will go on our way.

Mr. GARAMENDI. I yield.

Mr. GARAMENDI. People talk about the partisanship in Congress and in Washington, D.C., and I really have seen it. I saw it on the financial reform bill--the Democrats voting to rein in Wall Street, Republicans voting ``no.'' We saw it on an issue just raised about kids being able to go to school. Two weeks ago--3 weeks ago now, we voted on a major reform of the educational loans for American students.

Mr. GARAMENDI. It's hard to believe that the regulatory system for the financial underpinnings of this Nation was completely on the sidelines while Wall Street was playing these games. In the case of Lehman Brothers, what I would call it is flat out cooking your books. If that wasn't a fraud, I don't know what is a fraud. They should have been slapped down. That should have stopped. It didn't happen because the total regulatory process of this Nation was on the sidelines. There were 24 people looking over this entire industry, and the SEC, under Chairman Cox, who was appointed by George W. Bush, simply didn't do its job. Now, where are we going to go today? We passed out of this House--I find it a great privilege and honor to have been here to vote on the financial reform bill that was moved from Congress over to the other House on Democratic votes--very few--and I do not recall really any members of the Republican caucus voting for that financial reform. I know where we stood. We stood for regulating Wall Street, for reining in Wall Street. We want those profits to go to Main Street, not to the bigwigs on Wall Street. So where do we go from here? We await the action of the other House, which hopefully will come. I know the President will be speaking on this matter, I think, tomorrow, Thursday, to Wall Street. He is going to go up there and say, Give us the reforms. We need these reforms to set in place the proper guidelines for Wall Street, for the financial industry. Will it happen? What's your guess?

Mr. GARAMENDI. If you would yield for a moment, my recollection is that the Chairman of the Board of the Federal Reserve was saying that the market would regulate itself. Wasn't that what Mr. Greenspan was saying, that the market would regulate itself and that there was no need for government enforcement? Apparently, he was wrong. I recollect that he came before a congressional committee and said he'd made a mistake. He certainly did. Lehman Brothers was able to cook the books, and that's exactly what it is--cook the books. As the regulator of the insurance industry for 8 years, if a company would have come to me and if I would have seen that they were shifting their liabilities over to the asset column on the last day of the quarter and then shifting them back on the first day of the next quarter, that company should have been in deep trouble and would have been, but apparently, the SEC was a lapdog for Wall Street.

Mr. GARAMENDI. When did that happen? In what years?

Mr. GARAMENDI. Well, we have got some things to do, don't we? We have some work ahead of us. We hope that we'll get a bill back from the other House shortly and get a conference committee going. Could you put that thing back up on The Cracks in Wall Street. This is a street that needs a repair. This is a street that needs a serious repair. We need to go back. I would love to see the Glass-Steagall Act back in place. I was insurance commissioner for 8 years in California, and I know how that industry operates. If they're able to play games, if the banks are able to play games by moving money back and forth from one side to the other, there is going to be another crash coming in the days ahead.

Mr. GARAMENDI. Greed. Greed. Greed. Greed is not good for America. Greed is not good for Wall Street in the long run because it really brought down this Nation to its knees in 2007-2008. Here is the greed. Here is what we are talking about. We are talking about extraordinary bonuses for Wall Street. This is money that should be going to Main Street, not to Wall Street bonuses. There were $145 billion of bonuses in 2009. People in your district and in my district are losing their homes; foreclosures are going on; banks are not making loans to small businesses; we have 20 percent unemployment in the construction industry; we have 12 percent unemployment in the State of California, and they want these kinds of bonuses. At the same time, they're not making loans to businesses. This has got to stop. That's what this is about. This is about: Whose side are you on? Are you on the side of the working men and women, of the small businesses out there, of the local bankers, of the opportunity for this Nation to come back or are you on the side of Wall Street? I know where you are.

Mr. GARAMENDI. Pretty simple, isn't it?

Mr. GARAMENDI. Excuse me. If I might interrupt, are you telling me that the Wall Street banks, the financial industry, is spending $1.4 million a day lobbying Congress and the Senate to stop financial reform and the reregulation of Wall Street?

Mr. GARAMENDI. That's exactly right. Clearly, the American financial institutions have worked themselves into a situation that will continue the risk that nearly brought down the world's financial institutions and that brought the world into one of its most dangerous economic times since the Great Depression. So we need to move legislation. I know that you're a member of the Financial Services Committee here and that you worked long and hard throughout the summer and fall of last year to put together comprehensive reform of the financial institutions, reform that would rein in the excesses, reform that would create transparency, reform that would create a Consumer Protection Agency. Could you describe some of the work, some of the dealings, some of the things that were going on in the background? Where were, for example, the Wall Street firms? Were they supporting the reregulation of the industry? Where were the consumers in all of this? From your perspective, give us a little bit of history.

Mr. GARAMENDI. There ought to be a law that holds these banks to the highest possible standard, which is that they owe to their customers their best knowledge and information and that they don't double deal. It's the double dealing that's going on. That's the current SEC lawsuit against Goldman Sachs. It's about double dealing. On the one hand, they're here; on the other hand, they're there. They're playing both sides. That cannot be allowed. The cracks that you talked about there, particularly the Glass- Steagall repeal in 1991, really opened the door to not only the kinds of terrible meltdowns in the housing market and in the collateralized mortgage obligations but also in the loss of trillions of dollars of value that people held in their assets--in their portfolios, in their 401(k)s, which we know as 201(k)s, and in their homes. We lost 8 million jobs as a direct result of Wall Street's double dealing, of their excesses, of their extraordinary greed. Eight million jobs were lost, and 2.8 million homes were foreclosed. Pensions fell by $28 billion, and trillions of dollars of assets, of value, that families needed for their retirements and for their ongoing businesses were all blown away. It is time for us--it is time for America--to reestablish the fundamental rules of the road that we had, as you said, since the 1930s, since the Great Depression. Clear laws were established which said, if you're an investment banker, all right; if you're a banker, all right; and if you're an insurance company, all right, but you cannot be all three. We've got to get back to those kinds of very strict regulations; otherwise, this is going to happen again. We cannot depend on the market to discipline itself.

Mr. GARAMENDI. There ought to be a law.

Mr. GARAMENDI. Thank you very, very much for that description of the history. If the gentlewoman from California would care to engage in a colloquy with me, I'd like to discuss some of our history. When you were chairperson of the California Senate Banking and Insurance Committee, I recall that there was legislation. I was then the insurance commissioner. We were trying to hold insurance agents accountable for their actions, that they owed to their customers their best good faith effort and that they would always deal in the interest of their customers, not in their own personal interests--not in the interest of the insurance companies but, rather, in the interest of their customers. That is one of the fundamental things that you described which was taken away in the mid-2000s. As you were saying, the financial institutions no longer had any obligation to their customers but, rather, to their bottom line. Is that the case?

Mr. GARAMENDI. I'd like now to ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on this subject matter.