Edward Kaufman

Mr. KAUFMAN

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 Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KAUFMAN. Madam President, I ask unanimous consent to speak as in morning business.

Mr. KAUFMAN. I yield the floor and suggest the absence of a quorum.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I rise to discuss a bill I am introducing today, the Pre-Election Presidential Transition Act of 2010, bipartisan legislation that concerns both our national security and America's democratic institutions. I am proud to be joined by my colleague from Ohio, Senator Voinovich in introducing this bill. I also want to thank our cosponsors, Chairman Akaka of the Oversight of Government Management Subcommittee as well as Chairman Lieberman of the Homeland Security and Government Affairs Committee. I am appreciative of their support and for their input while drafting this bill. I also would like to thank the Partnership for Public Service, a leading nonpartisan, nonprofit organization in the area of government accountability and reform. Their recent ``Ready to Govern'' report on the 2008-2009 transition made a number of important recommendations that are included in our bill. As the strong, bipartisan support for this bill demonstrates, this is not a political issue. After the attacks of September 11, we face new security challenges that require close cooperation between outgoing and incoming administrations, and the recent economic crisis underscores the importance of a smooth handoff on domestic policy as well. This was highlighted in a recent article by Martha Kumar, a respected political scientist at Towson University and Director of the nonpartisan White House Transition Project. As Professor Kumar recounts in her December 2009 article in Presidential Studies Quarterly, a threat to President Obama's inauguration brought together the incoming and outgoing senior national security personnel in the White House Situation Room the morning of his swearing-in. In the hours before then-President-elect Obama was to take office, intelligence sources had indicated a possible plot to attack the National Mall during the ceremony. Thankfully, this threat proved a false alarm. But, as Kumar explains, that Situation Room meeting between advisers to President Bush and President-elect Obama was a powerful example of why transition planning is so important. In their meeting that morning, those on both sides worked well together as a team. This was so because they had met frequently in the weeks beforehand and had undergone joint emergency preparedness exercises together. This occurred in no small part because the administration of former President George W. Bush made it a high priority. The former President and his White House staff deserve great credit for their work during their final months in office. By appointing his chief of staff, Joshua Bolton, as his transition point-person and convening a formal Transition Coordinating Council, President Bush created a successful model for a 21st century transfer of power. Presidential inaugurations have always been moments of celebration for Americans, as we reaffirm the elective nature of our government. But they also represent moments of potential vulnerability. In the earliest years of our history, that vulnerability inhabited the untested nature of our institutions. In an era when elected government was rare, the transition from one executive administration to another, particularly those between parties, brought fears of political or social unrest. The primary example of such a transition remains that from the administration of John Adams to that of Thomas Jefferson, the first between opponents of different parties to contest the Presidency. The peaceful nature of the 1801 transition came as a welcome surprise to some. The early American writer and novelist, Margaret Bayard Smith, whose brother, James Bayard, held the Senate seat from Delaware I now occupy, attended that inauguration. In a letter to her daughter, she described it thus: I have this morning witnessed one of the most interesting scenes a free people can ever witness. The changes of administration, which in every government and in every age have most generally been epochs of confusion, villainy, and bloodshed, in this our happy country take place without any species of distraction or disorder. It is also notable that the greatest political crisis in our history occurred during the period between election day in November 1860 and Abraham Lincoln's inauguration the following March. The States that seceded did so amid a palpable uncertainty of national leadership. Today, however, our concern is less with political stability than with national security. During the Cold War, when fears of a power vacuum caused a renewed focus on continuity of government, Congress passed the Presidential Transition Act of 1963. It formalized several important elements of a successful transition, including public funds for transition staff, use of office space and equipment from the General Services Administration, reimbursement for travel by the President-elect and Vice President- elect, and their use of franked mail. It was amended in 1998 to permit the President-elect and Vice President-elect to supplement public transition funding with private donations and laid out requirements for disclosing their sources. In 2004, Congress took an important step by including provisions in the Intelligence Reform and Terrorism Prevention Act that allow transition personnel to request FBI background checks for potential appointees. This helps ensure that, on January 20 when the new President is sworn in, the most critical national security positions are immediately filled. While some aspects of a successful Presidential transition process have been formalized by these acts, much of what has become necessary for a safe and smooth transition is still left to chance. Fortune favors the prepared. We were very lucky that the first transition of the post-September 11 era was carried out smoothly and with great preparation by both the outgoing and incoming administrations. As I said a few moments ago, we owe great thanks to former President Bush for making this a priority and committing staff and resources to the process. I also commend those who worked on both the Obama transition team as well as those from Senator McCain's campaign who engaged in some transition planning before election day. Most importantly, our bill will go a long way in removing the stigma that has historically caused candidates to hide or even delay important transition planning until after election day. We all recognize that the first priority of any Presidential campaign is to win the election. I certainly understand why, in the past, candidates have been wary of revealing that they have engaged in pre- election transition planning. But we cannot afford to lose critical planning time because of fears that a candidate might be accused by a rival of ``measuring the drapes'' prematurely. We must also ensure that incumbents make the necessary preparations in case they lose bids for reelection. Candidate transition planning is an act of responsibility, not presumptuousness. With the security and domestic policy challenges we face today, it must become the norm for any major party nominee to begin making arrangements for a transition long before election day. The bill my colleagues and I are introducing will both formalize many of the recent transition's successes and provide additional resources to help nominees begin their transition efforts earlier. The Pre-Election Presidential Transition Act of 2010 encourages eligible Presidential candidates to accept transition office space and a broad array of services from the General Services Administration immediately after their nominating conventions. Presently, candidates must wait until after election day before these resources become available. We know that this is too late, since both campaigns in 2008, and others in recent years, began informal transition planning months in advance. Under our bill, salaries for candidates' transition staff, travel expenses, and allowances are funded exclusively by separate funds raised by their campaigns prior to the election. Eligible candidates would be authorized to set up a separate account to support these activities. They would be able to transfer money from their campaign accounts into this transition account as well as raise funds separately. Those candidates eligible to receive GSA-provided services and access to facilities include major party candidates. Third-party candidates would be eligible if they met the same criteria used by the Commission on Presidential Debates to participate in general election debates. The GSA would distribute to candidates a report on modern transitions, including a bibliography of resources. This report would also be released to the public and posted on the Internet to educate the press and public on the importance of early transition planning. Of course, under the bill services and information to candidates would be provided on an equal basis and without regard to political affiliation, and they would have to be used only for transition purposes. Because a transition depends on the careful attention of those both preparing to assume power and those leaving it, our bill also authorizes appropriations for the outgoing administration to use in planning and coordinating transition activities across departments and agencies. It recommends adopting the Bush model of a transition coordinating council, staffed by both outgoing appointees and career managers from each agency. This council would meet regularly with representatives from the major nominees and update them on transition matters. The bill also encourages the outgoing administration to prepare comprehensive briefing materials for incoming officials on a range of issues and potential areas of concern. My colleagues and I approach this as pragmatists, and our goal is not to tie the hands of an administration. It is to inspire responsible preparation. This bill is not about telling an outgoing President what to do; rather, it lays out a strongly suggested model for how to do the right thing. The only new requirement it sets for the outgoing President is the submission of two reports to Congress in the months before election day describing the activities being undertaken to prepare for the transfer of power. But the model it suggests has worked and can serve as a blueprint for transitions to come. My first job in politics after Joe Biden was elected to the Senate in 1972 was to help him set up his Senate office in Delaware. My last job, before I was appointed to his Senate seat was as co-chair of his Vice Presidential Transition Team. I can tell you from experience, setting up a Senate office is tough, but it is nothing like setting up a White House. I was there in the room when then-President-elect Obama and Vice President-elect Biden convened their first transition meetings right after election day. I cannot stress more forcefully how important it was in those meetings that the Obama-Biden transition had begun much earlier. There simply is not enough time between November and January to get everything done that needs to be done. These are the reasons why I hope my colleagues will join us in supporting this legislation to make our presidential transitions smoother and safer. We cannot afford to leave something this important to chance. Again, I want to thank my friend and colleague from Ohio, Senator Voinovich, for his help in pulling this bill together as well as Senators Akaka and Lieberman for their support and leadership. I look forward to working with them on the Homeland Security and Governmental Affairs Committee to move this measure through the Congress. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I rise to discuss a bill I am introducing today, the Pre-Election Presidential Transition Act of 2010, bipartisan legislation that concerns both our national security and America's democratic institutions. I am proud to be joined by my colleague from Ohio, Senator Voinovich in introducing this bill. I also want to thank our cosponsors, Chairman Akaka of the Oversight of Government Management Subcommittee as well as Chairman Lieberman of the Homeland Security and Government Affairs Committee. I am appreciative of their support and for their input while drafting this bill. I also would like to thank the Partnership for Public Service, a leading nonpartisan, nonprofit organization in the area of government accountability and reform. Their recent ``Ready to Govern'' report on the 2008-2009 transition made a number of important recommendations that are included in our bill. As the strong, bipartisan support for this bill demonstrates, this is not a political issue. After the attacks of September 11, we face new security challenges that require close cooperation between outgoing and incoming administrations, and the recent economic crisis underscores the importance of a smooth handoff on domestic policy as well. This was highlighted in a recent article by Martha Kumar, a respected political scientist at Towson University and Director of the nonpartisan White House Transition Project. As Professor Kumar recounts in her December 2009 article in Presidential Studies Quarterly, a threat to President Obama's inauguration brought together the incoming and outgoing senior national security personnel in the White House Situation Room the morning of his swearing-in. In the hours before then-President-elect Obama was to take office, intelligence sources had indicated a possible plot to attack the National Mall during the ceremony. Thankfully, this threat proved a false alarm. But, as Kumar explains, that Situation Room meeting between advisers to President Bush and President-elect Obama was a powerful example of why transition planning is so important. In their meeting that morning, those on both sides worked well together as a team. This was so because they had met frequently in the weeks beforehand and had undergone joint emergency preparedness exercises together. This occurred in no small part because the administration of former President George W. Bush made it a high priority. The former President and his White House staff deserve great credit for their work during their final months in office. By appointing his chief of staff, Joshua Bolton, as his transition point-person and convening a formal Transition Coordinating Council, President Bush created a successful model for a 21st century transfer of power. Presidential inaugurations have always been moments of celebration for Americans, as we reaffirm the elective nature of our government. But they also represent moments of potential vulnerability. In the earliest years of our history, that vulnerability inhabited the untested nature of our institutions. In an era when elected government was rare, the transition from one executive administration to another, particularly those between parties, brought fears of political or social unrest. The primary example of such a transition remains that from the administration of John Adams to that of Thomas Jefferson, the first between opponents of different parties to contest the Presidency. The peaceful nature of the 1801 transition came as a welcome surprise to some. The early American writer and novelist, Margaret Bayard Smith, whose brother, James Bayard, held the Senate seat from Delaware I now occupy, attended that inauguration. In a letter to her daughter, she described it thus: I have this morning witnessed one of the most interesting scenes a free people can ever witness. The changes of administration, which in every government and in every age have most generally been epochs of confusion, villainy, and bloodshed, in this our happy country take place without any species of distraction or disorder. It is also notable that the greatest political crisis in our history occurred during the period between election day in November 1860 and Abraham Lincoln's inauguration the following March. The States that seceded did so amid a palpable uncertainty of national leadership. Today, however, our concern is less with political stability than with national security. During the Cold War, when fears of a power vacuum caused a renewed focus on continuity of government, Congress passed the Presidential Transition Act of 1963. It formalized several important elements of a successful transition, including public funds for transition staff, use of office space and equipment from the General Services Administration, reimbursement for travel by the President-elect and Vice President- elect, and their use of franked mail. It was amended in 1998 to permit the President-elect and Vice President-elect to supplement public transition funding with private donations and laid out requirements for disclosing their sources. In 2004, Congress took an important step by including provisions in the Intelligence Reform and Terrorism Prevention Act that allow transition personnel to request FBI background checks for potential appointees. This helps ensure that, on January 20 when the new President is sworn in, the most critical national security positions are immediately filled. While some aspects of a successful Presidential transition process have been formalized by these acts, much of what has become necessary for a safe and smooth transition is still left to chance. Fortune favors the prepared. We were very lucky that the first transition of the post-September 11 era was carried out smoothly and with great preparation by both the outgoing and incoming administrations. As I said a few moments ago, we owe great thanks to former President Bush for making this a priority and committing staff and resources to the process. I also commend those who worked on both the Obama transition team as well as those from Senator McCain's campaign who engaged in some transition planning before election day. Most importantly, our bill will go a long way in removing the stigma that has historically caused candidates to hide or even delay important transition planning until after election day. We all recognize that the first priority of any Presidential campaign is to win the election. I certainly understand why, in the past, candidates have been wary of revealing that they have engaged in pre- election transition planning. But we cannot afford to lose critical planning time because of fears that a candidate might be accused by a rival of ``measuring the drapes'' prematurely. We must also ensure that incumbents make the necessary preparations in case they lose bids for reelection. Candidate transition planning is an act of responsibility, not presumptuousness. With the security and domestic policy challenges we face today, it must become the norm for any major party nominee to begin making arrangements for a transition long before election day. The bill my colleagues and I are introducing will both formalize many of the recent transition's successes and provide additional resources to help nominees begin their transition efforts earlier. The Pre-Election Presidential Transition Act of 2010 encourages eligible Presidential candidates to accept transition office space and a broad array of services from the General Services Administration immediately after their nominating conventions. Presently, candidates must wait until after election day before these resources become available. We know that this is too late, since both campaigns in 2008, and others in recent years, began informal transition planning months in advance. Under our bill, salaries for candidates' transition staff, travel expenses, and allowances are funded exclusively by separate funds raised by their campaigns prior to the election. Eligible candidates would be authorized to set up a separate account to support these activities. They would be able to transfer money from their campaign accounts into this transition account as well as raise funds separately. Those candidates eligible to receive GSA-provided services and access to facilities include major party candidates. Third-party candidates would be eligible if they met the same criteria used by the Commission on Presidential Debates to participate in general election debates. The GSA would distribute to candidates a report on modern transitions, including a bibliography of resources. This report would also be released to the public and posted on the Internet to educate the press and public on the importance of early transition planning. Of course, under the bill services and information to candidates would be provided on an equal basis and without regard to political affiliation, and they would have to be used only for transition purposes. Because a transition depends on the careful attention of those both preparing to assume power and those leaving it, our bill also authorizes appropriations for the outgoing administration to use in planning and coordinating transition activities across departments and agencies. It recommends adopting the Bush model of a transition coordinating council, staffed by both outgoing appointees and career managers from each agency. This council would meet regularly with representatives from the major nominees and update them on transition matters. The bill also encourages the outgoing administration to prepare comprehensive briefing materials for incoming officials on a range of issues and potential areas of concern. My colleagues and I approach this as pragmatists, and our goal is not to tie the hands of an administration. It is to inspire responsible preparation. This bill is not about telling an outgoing President what to do; rather, it lays out a strongly suggested model for how to do the right thing. The only new requirement it sets for the outgoing President is the submission of two reports to Congress in the months before election day describing the activities being undertaken to prepare for the transfer of power. But the model it suggests has worked and can serve as a blueprint for transitions to come. My first job in politics after Joe Biden was elected to the Senate in 1972 was to help him set up his Senate office in Delaware. My last job, before I was appointed to his Senate seat was as co-chair of his Vice Presidential Transition Team. I can tell you from experience, setting up a Senate office is tough, but it is nothing like setting up a White House. I was there in the room when then-President-elect Obama and Vice President-elect Biden convened their first transition meetings right after election day. I cannot stress more forcefully how important it was in those meetings that the Obama-Biden transition had begun much earlier. There simply is not enough time between November and January to get everything done that needs to be done. These are the reasons why I hope my colleagues will join us in supporting this legislation to make our presidential transitions smoother and safer. We cannot afford to leave something this important to chance. Again, I want to thank my friend and colleague from Ohio, Senator Voinovich, for his help in pulling this bill together as well as Senators Akaka and Lieberman for their support and leadership. I look forward to working with them on the Homeland Security and Governmental Affairs Committee to move this measure through the Congress. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. KAUFMAN

Mr. KAUFMAN. I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I have spoken twice on the floor in the past few weeks on the problem of ``too big to fail.'' This is a critical issue for any financial reform legislation. Each Senator must ask whether this issue is effectively addressed in landmark legislation the Senate will soon consider. I will limit my remarks today to the central aspect of the challenge we face, ``too big to fail.'' In particular, does this bill take the necessary steps to reduce the size, complexity, and concentrated power of the behemoths that currently dominate our financial industry and our economy? If not, what is the justification for maintaining their status quo, what is the risk that one might fail, and--if that were to occur--what is the likelihood that the American taxpayer will once again have to bail them out? The answer is that there is little in the current legislation that would change the behavior or reduce the size of the Nation's six megabanks. Instead, this bill invests its hopes in two ideas: First, that chastened regulators--who, we must remember, failed miserably in preventing the crisis--will this time control these megabanks more effectively--today, tomorrow, and decades into the future. And, second, that a resolution authority designed to shield the taxpayers from yet another bailout will be able successfully to unwind incredibly complex megabanks that are engaged across the globe. In the midst of the Great Depression, Congress built laws that maintained financial stability for nearly 60 years. Through the Glass-Steagall Act, which included the establishment of the Federal Deposit Insurance Corporation, Congress separated investment banks, which were free to engage in risky behavior, and commercial banks, whose deposits were federally insured. As I described in a previous speech, during the last 30 years, that division was methodically disassembled by a deregulatory mindset, leading to the reckless Wall Street behavior that caused the greatest financial crisis and economic downturn since the 1930s. What walls will this bill erect? None. On what bedrock does this bill rest if the Nation is to hope for another 60 years of financial stability? Better and smarter regulators, plain and simple. No great statutory walls, no hard divisions or limits on regulatory discretion, only a reshuffled set of regulatory powers that already exist. Remember, it was the regulators who abdicated their responsibilities and helped cause this crisis. Thus far, on the central aspect of ``too big to fail,'' financial reform consists of giving regulators the authority to supervise institutions that are too big, and then the ability to resolve those banks when they are about to fail. Upon closer examination, however, the former is virtually the same authority regulators currently possess, while the latter--an orderly resolution of a failing megabank--I believe, is an illusion. Unless Congress breaks up the megabanks that are ``too big to fail,'' the American taxpayer will remain the ultimate guarantor in an almost certain-to-repeat-itself cycle of boom, bust, and bailout. The first question is how big must a financial institution be to be ``too big to fail''? Let us examine how concentrated some of our giant financial institutions have become. Only 15 years ago, the six largest U.S. banks had assets equal to 17 percent of overall gross domestic product. The six largest banks today in the United States now have total assets estimated to be in excess of 63 percent of our gross domestic product. Three of these megabanks have close to $2 trillion of assets on their balance sheets. Their gigantic size, and the perception in the marketplace that they are indeed too big for the government ever to permit them to fail, gives these megabanks a competitive advantage over smaller financial institutions. It also instills a dangerous willingness to engage in excessive risk taking. As Federal Reserve Chairman Ben Bernanke recently stated, [I]f a firm is publicly perceived as too big, or interconnected, or systemically critical for the authorities to permit its failure, its creditors and counterparties have less incentive to evaluate the quality of the firm's business model, its management, and its risk-taking behavior. As a result, such firms face limited market discipline, allowing them to obtain funding on better terms than the quality or riskiness of their business would merit and giving them incentives to take on excessive risks. In other words, with a taxpayer safety net beneath them, these Wall Street firms will continue to have an irresistible incentive to keep walking across a financial high-wire of speculative investments in search of ever greater profits. Some might say that Canada and other countries also have large banks and didn't encounter serious problems. But this ignores the obvious facts that our economy is about 10 times the size of Canada's and our financial ecosystem is far more complex. It also ignores that Canada's largest banks rest on a bedrock of government-guaranteed mortgages and a social compact between those banks and their regulators. To adopt a Canadian-type model in the U.S., we would need to merge our banks into even fewer banking giants, and then re-inflate Fannie Mae and Freddie Mac to guarantee some of the riskiest parts of the banks' portfolios. Moreover, for every example of a country--usually far smaller than ours--that has coped with megabanks, there are at least as many where this system has failed, and failed spectacularly. Take Ireland, for example, whose largest banks went on a credit binge that ended in disaster. Now Ireland's citizens are paying the price through draconian pay cuts and higher taxes, to say nothing of the country's lost economic growth. Ireland provides a cautionary tale. These megabanks, whether they are legally domiciled in our borders or beyond, are simply too big to manage and too complicated to regulate. There are also those who argue that we have had financial crises caused largely by small institutions. That is absolutely true. But those problems were managed without bringing our entire financial system to the brink of disaster, the signature and near-cataclysmic event of the last crisis. In the savings and loan crisis, more than 700 thrifts--both large and small--failed, many wrongdoers were sent to prison, and the Resolution Trust Corporation was created to liquidate the assets of failed institutions. In short, the crisis was managed and our financial system absorbed the blows. Compare that to the last crisis when our financial system barely recovered from a black hole that threatened to suck into oblivion our entire financial system after the failure of just one large investment bank. The legislation proposes that we must improve the regulation of institutions that are ``too big.'' The reform proposals would put in place a systemic risk council to monitor for such risks and to identify financial institutions that should be subject to enhanced supervision. Next, they would have the Federal Reserve act as the de facto regulator of these systemically significant financial institutions. The truth is, we have had a de facto systemic risk council for decades. It is called the President's Working Group on Financial Markets. Chaired by the Treasury Secretary, it includes the heads of the Federal Reserve, the Securities and Exchange Commission, and the Commodities Futures Trading Commission, and it was established by President Reagan following the 1987 stock market crash. Its track record in spotting incipient financial risks has been abysmal. Notably, Treasury Secretary Paulson used the President's Working Group as a form of a systemic risk council, but it achieved essentially nothing--nothing--to reduce those risks. While adding additional members and providing some additional powers, the new systemic risk council is the President's Working Group by another name. The reform proposals would also give the Federal Reserve the authority to supervise institutions that the council deems are systemically significant. Under the proposed legislation, the Federal Reserve would have specific powers to impose higher leverage, capital, liquidity, and other requirements upon these institutions. The Federal Reserve already has the power to impose such standards on most of these institutions. The proposed regulatory reforms are mainly a redundant statement of the Fed's existing powers. Just this week, a Moody's report stated: . . . the proposed regulatory framework doesn't appear to be significantly different from what exists today. Moody's went on to explain that: The current regulatory regime is already authorized to protect the soundness of banks and the financial system as a whole. In addition, the current banking laws give bank regulators the power to have banks cease and desist from activities and to require banks to have higher capital ratios. No doubt the bill does contain some expanded tools for the Fed. For the first time, the Fed will have direct supervisory authority for not just bank holding companies, but for their large nonbank subsidiaries as well. In addition, the Fed will also have authority over nonbank financial institutions that the council deems are systemically risky. But as Moody's has recognized, the powers resemble the current regulatory framework. Federal bank regulators, which had the responsibility to ensure financial stability before the crisis, will again bear the responsibility after the crisis. And bank regulators will continue to dance the tango with the big banks, interrupted briefly by new legislation which, in fact, includes few substantive changes in safety and soundness banking practices. It is true that under the current Senate bill, regulators could-- could--potentially invoke the Volcker Rule, which would prohibit commercial banks from owning or sponsoring ``hedge funds, private equity funds, and purely proprietary trading in securities, derivatives or commodity markets.'' I applaud former Federal Reserve Chairman Paul Volcker for his critical leadership on these issues, which the administration has endorsed. Unfortunately, the legislation now being considered by the Senate requires the council first to study the Volcker rule before deciding whether to enforce it. In the end, it could issue a recommendation not to enforce the Volcker rule at all. Or the council might recommend simply that regulators mandate capital requirements that are adequate for any risky proprietary activities a particular bank might undertake--a power regulators already have. The reality is that regulators have long had the authority to prohibit speculative activities at banks, but never opted to do so. Under the Bank Holding Company Act, the Federal Reserve may require a bank holding company to terminate an activity or control of a nonbank subsidiary--such as a broker-dealer or an insurance company--if that activity or subsidiary poses serious risk to the safety, soundness or stability of the holding company. As we all know too well, in the past, these very same bank regulators failed utterly. Indeed, as the ``umbrella regulator'' for all bank holding companies, the Federal Reserve could have increased capital and other requirements for these institutions, but instead farmed out this function to credit rating agencies and the banks themselves. Meanwhile, as the consolidated supervisor of major investment banks, the SEC had similar powers to those of the Fed. And it goes without saying that its track record of regulatory enforcement was littered with colossal failures. Chastened regulators may try in the coming years to be harder on the megabanks, to increase their capital requirements, and to keep a close eye on their liquidity levels, liabilities, and leverage ratios. But even if they do, history has shown us that the tango will reach the end of the dance floor, and the big banks will execute the turn and lead again, leaving our regulators hopelessly aside in understanding the complex and opaque transactions that interconnect the giant banks. In sum, little in these reforms is really new, and nothing in these reforms will change the size ofour megabanks. That is why I believe we must impose these changes by statute--by statute. I would go beyond even statutorily requiring banks to live under the Volcker rule, by reinstating by statute the firewall between commercial and investment banking activities. Unless we break the megabanks apart, they will remain too large and interconnected for regulators to effectively control them. And once the next inevitable financial crisis occurs, and the contagion spreads too quickly for the government to believe that a failing firm won't take down others as well, the American taxpayer--the American taxpayer--the American taxpayer--will again be forced into the breach. The proposed plan calls for a resolution authority to deal with these institutions when they inevitably get into trouble. An early resolution, we are promised, guided by a systemic council looking into its crystal ball, will prevent the taxpayer from ever again needing to save the day. It is true that the existing mechanism, which tasks the FDIC with resolving failing depository institutions, has worked well--but only worked well up to a point. The problem is that our experience with resolving banks--highlighted by the 140 bank failures that occurred last year and their cost to the deposit insurance fund--has shown us that prompt corrective action is almost always too late. As many commentators have noted, no matter how well Congress crafts a resolution mechanism, there can never be an orderly winddown of a $2 trillion financial institution that has hundreds of billions of dollars of off-balance-sheet assets, relies heavily on wholesale funding, and has more than a toehold in over 100 countries. A backstop of a $50 billion or even a $100 billion resolution fund would come nowhere close to being big enough to resolve a $2 trillion financial institution. As the Economist notes: [Resolution authority] may prove unworkable, of course. The threat of being wiped out in bankruptcy could cause creditors to flee both the troubled firm and any firms like it, precisely the sort of panic the resolution regime is meant to avoid. ``In a severe financial crisis it will be too terrifying for politicians and bureaucrats to use'' the new process, predicts Douglas Elliott of the Brookings Institution. Instead, he says, they will resort to ad hoc measures as they did in 2008. Not surprisingly, there are many barriers to resolving large and complex financial institutions. Most notably, there are international dimensions to the problem, depending on resolution authority. Following the collapse of Lehman Brothers, there was an intense and disruptive dispute between regulators in the U.S. and U.K. over how to handle customer claims and liabilities. While U.S. bankruptcy protection allowed Lehman Brothers' U.S. operations to continue for days as a going concern, Lehman's operations in the U.K. were halted in accordance with British bankruptcy law. Given that there apparently were more than 600,000 open derivatives contracts in the U.K. on the day that Lehman failed, many counterparties and clients were stranded, consequently hampering bankruptcy efforts in the U.S. as well. To those who promote resolution authority as a solution, I ask: Exactly what would have happened differently if Lehman had been in receivership during those harrowing days in September? Moreover, the reluctance last spring to nationalize these banks, to place them in a form of resolution receivership, was because it would have been too costly to the taxpayer to take over or put into bankruptcy the megabanks. Why would it not be costly with a U.S.-only resolution authority? The truth is: It would be. The taxpayer will remain the ultimate guarantor. The international difficulty of acting quickly before contagion spreads is almost impossible to overcome without a cross-border resolution agreement. Unfortunately, there is nothing in the resolution authority that the Senate will consider that would help address this problem. We all know that it is a problem that will only get worse given the inevitability of further financial globalization. In coming years, the U.S. megabanks will extend their reach into global markets, relying on their funding advantages as too-big-to-fail U.S. banks to profit from increasingly sophisticated transactions in countries around the world. The problems with resolution authority for the megabanks aren't just international in nature. These institutions use short-term collateralized loans called repurchase agreements, or repos, to finance a significant portion of their balance sheet and have massive counterparty exposures that arise out of their roles as derivatives dealers. Both repos and derivatives are qualified financial contracts, meaning that exposures that arise from them are effectively super senior to the claims of all other creditors. By giving these trading exposures such a privileged position under the bankruptcy code, we have allowed a major part of our financial system--called the shadow banking system--to grow completely unchecked without any market or regulatory discipline whatsoever. As Peter Fisher, former Under Secretary of the Treasury and former head of the markets desk at the Federal Reserve Bank of New York, has stated: [these changes to the bankruptcy code] transformed the `too-big-to-fail' problem of our largest deposit takers into the `too-interconnected-to-fail' problem of our major financial institutions. The proof of that statement is borne out by the data. One report by researchers at the Bank of International Settlements estimated that the size of the overall repo market in the U.S., Euro region and the U.K. totaled approximately $11 trillion at the end of 2007. Meanwhile, the total notional value of OTC derivatives contracts is equal to $605 trillion, as of June, 2009. Large financial institutions that rely chiefly upon wholesale financing and have massive counterparty exposures from their derivatives positions are combustible. The case studies of Lehman and the other investment banks show how quickly and violently these institutions can implode. When they do, their interconnected nature inevitably causes a contagion, leading to a collapse in confidence and the classic patterns of a bank run. As the Moody's report summarizes the question, We must: try to assess whether or not the law could be effective in its stated objective: allowing a troubled, systemically important financial institution to default on selected obligations, while avoiding the larger effects that such a default might have on the financial system and on the broader economy. That is a challenging objective to accomplish in reality, given contagion risk and the high degree of connectedness among such institutions, both domestically and cross border (where any such resolution authority would have no authority). Resolution authority is therefore a slender reed upon which to lean when it comes to institutions as large, complex and interconnected as these. The truth is that we need to split up and break down the largest and most complex financial institutions. As President of the Federal Reserve Bank of Dallas Richard Fisher stated on March 3rd: I think the disagreeable but sound thing to do regarding institutions that are [`too big to fail'] is to dismantle them over time into institutions that can be prudently managed and regulated across borders. And this should be done before the next financial crisis, because it surely cannot be done in the middle of a crisis. The first step is to separate federally insured banks from risky investment banks. As Senators Maria Cantwell, John McCain and others have urged, we should break up the largest banks and resign to history ``too big to fail'' banks. This worked for nearly 60 years, and would once again ensure the soundness of commercial banks while placing risky investment bank activities far beyond any government safety net. Second, we also need statutory size and leverage limits on banks and nonbanks. We should set a hard cap on the liabilities of banks and other financial institutions as a percentage of GDP. The size limit should constrain the amount of non-deposit liabilities at large mega-banks, which rely heavily on short-term financing like repos and commercial paper. In addition, we should institute a simple statutory leverage requirement to limit how much firms can borrow relative to how much their shareholders have on the line. Finally, we must put in place reforms for derivatives and other qualified financial contracts. Get this: The five largest banks control 95 percent of the OTC derivatives market. We must require derivatives to be centrally cleared, which will reduce the complex web of counterparty credit risks throughout our system. CFTC Chairman Gary Gensler underscores that point by stating: Central clearing would greatly reduce both the size of dealers as well as the interconnectedness between Wall Street banks, their customers and the economy. In addition, we should reconsider the legal treatment of qualified financial contract exposures under the bankruptcy code, and therefore under a resolution regime, as well. Given the sheer size of cross exposures arising from derivatives and repos that financial firms have with each other, it makes sense to allow derivative and repo exposures to be netted out prior to any automatic stay. It is not apparent why that net credit exposure should come ahead of the claims of other secured creditors. This is special treatment, not market discipline. All of these changes taken together would reduce risk in the system, impose discipline in the market, and break the cycle of obligatory booms, busts and bailouts. In short, they eliminate the problem of having institutions that are both too big and interconnected to fail. If instead our solution is to depend on regulators, and to wait with an impractical plan to resolve failing institutions, the financial system will continue on its inexorable path, growing bigger, more complex and more concentrated. And we will only be laying the groundwork for an even greater crisis the next time. In the midst of the Great Depression, we built strong walls that lasted for generations. The devastation of our most recent crisis challenges us to do so again. These megabanks are too big to manage, too big to regulate, too big to fail, and too interconnected to resolve when the next crisis hits. We must break up these banks and separate again those commercial banking activities that are guaranteed by the government from those investment banking activities that are speculative and reflect greater risk. We must limit the size, liabilities, and leverage of any systemically significant financial institution. Given the ever-increasing rate of financial innovation, the need for Congress--not the regulators--to impose these time-honored principles has never been greater. The stakes have never been higher. It is time to follow in the footsteps of those great Senators who made the tough decision in the 1930s to pass the Glass-Steagall Act and other landmark reform bills, which paved the way for almost 60 years without a major financial meltdown. Once again, we must ensure that government guarantees of commercial bank deposits do not enable financial institutions to engage in the risky activities of investment banks. Finally we must guarantee that there are no banks that are too big to manage too big to regulate, and too big to fail. The American people deserve no less. Mr. President, I yield the floor. Mr. President, I suggest the absence of a quorum.

Mr. KAUFMAN

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

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Veterans Affairs Committee be discharged from further consideration of S. 3162 and the Senate proceed to its immediate consideration.

Mr. KAUFMAN. I ask unanimous consent that the bill be read a third time and passed, the motion to reconsider be laid upon the table, with no intervening action or debate, and any statements related to the bill be printed in the Record.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Homeland Security and Governmental Affairs Committee be discharged from further consideration of H.R. 4621, and the Senate proceed to its immediate consideration.

Mr. KAUFMAN. I ask unanimous consent that the bill be read a third time and passed, the motion to reconsider be laid upon the table, with no intervening action or debate, and any statements related to the bill be printed in the Record.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of H.R. 4573, which was received from the House. The clerk will report the bill by title.

Mr. KAUFMAN. Mr. President, I ask unanimous consent that a Dodd amendment, which is at the desk, be agreed to; the bill, as amended, be read a third time and passed; the motion to reconsider be laid upon the table, with no intervening action or debate, and any statements related to the bill be printed in the Record.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent the Judiciary Committee be discharged from further consideration of S. Res. 117 and S. Res. 412 en bloc, and the Senate proceed to their immediate consideration en bloc.

Mr. KAUFMAN. I ask unanimous consent the resolutions be agreed to, the preambles be agreed to, and the motions to reconsider be laid upon the table, with no intervening action or debate en bloc, and any statements related to the resolutions be printed in the Record at the appropriate place.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent the Senate proceed to the immediate consideration of H.J. Res. 80, which was received from the House and is at the desk.

Mr. KAUFMAN. I ask unanimous consent the joint resolution be read three times and passed, the preamble be agreed to, the motions to reconsider be laid upon the table, with no intervening action or debate, and any statements be printed in the Record.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Senate now proceed to the en bloc consideration of the following resolutions: S. Res. 471, S. Res 472, S. Res. 473, and S. Res. 474.

Mr. KAUFMAN. I ask unanimous consent the resolutions be agreed to, the preambles be agreed to, and the motions to reconsider be laid upon the table en bloc.

Mr. KAUFMAN

Mr. KAUFMAN. I ask unanimous consent the Judiciary Committee be discharged from further consideration of S. Res. 427, and the Senate proceed to its immediate consideration.

Mr. KAUFMAN. I ask unanimous consent the resolution be agreed to; a Baucus amendment to the preamble be agreed to, the preamble, as amended, be agreed to; the motions to reconsider be laid upon the table, with no intervening action or debate, and any statements be printed in the Record.

Mr. KAUFMAN

Mr. KAUFMAN. I ask unanimous consent that notwithstanding an adjournment of the Senate, the Senate committees may file reported legislative and Executive Calendar business on Thursday, April 1, 2010, from 11 a.m. to 1 p.m.

Mr. KAUFMAN. I suggest the absence of a quorum.

Mr. KAUFMAN. I ask unanimous consent that the order for the quorum call be rescinded.