Edward Kaufman

Mr. KAUFMAN

Mr. KAUFMAN. I will yield, but this is a case where I think we have to look into this and see what is going on. I yield for the Senator from Arizona.

Mr. KAUFMAN. Madam President, the Senator from Virginia right from the beginning has been sympathetic. Because of his great knowledge on Wall Street and finance, he has been a great source of encouragement to me. I have spoken on this floor repeatedly, and this is not a surprise. If this turns out to be the worst case of what we are talking about--we do not know. What happened over the years is that we basically went from a market that was a floor-based market to a market that was digitalized and decimalized, where we began to have tenths using decimals as opposed to eighths. What happened is that markets, computer firms--if you want to read a great story, a book called ``The Quants,'' by Scott Patterson. People came into the market and began to develop these high-speed computers. Human beings were no longer doing the trading, computers were. They developed these algorithms. It ran automatically. It grew and grew, and now it is something like--they went from 30 percent to 70 percent of all the trades on our markets are in this high-frequency trading, using these high speed computers. There is no way to know what is going on. They trade 2,000 to 3,000 shares in a second. No one knows what is happening in the exchanges when this trading is going on. No one knows. The Securities and Exchange Commission has said--after repeated requests--that we are going to go look at market structure. This is months ago. They say we are going to look into this. Now they are having a group look into it. Right now, there is no way to know what is happening in this marketplace. All we have been requesting from the Securities and Exchange Commission is that they take a look at what is happening. Remember, you have 2,000 to 3,000 trades a second. The only records that are kept are of the actual trades. But 90 percent--to let you know how complicated this is--90 percent of the trades are canceled. Why are they doing that? There are a lot of allegations about why they are doing this and what is going on, but right now we have this gigantic business--70 percent of our trading--and we have no idea what is going on. I will say one final thing, because it reflects on this bill. What will happen if we allow our banks to be mingled with our investment banks and don't put some kind of cap on it? That is my big concern. Investment banks are into high risk things, and that is where most of these things are taking place. If you go back and look at derivatives, what we had under derivatives is a whole lot of money. Nobody argues, derivatives are gigantic. This is now gigantic. You had a lot of change. We went from very few derivatives to massive numbers of them. We went from 30 to 70 percent of all our trades being high frequency trading. We have no transparency as we have with derivatives. We didn't know what was going on in the derivatives market. We had no regulation, because you don't know what the trades are. And what happened? We had this gigantic meltdown. I am saying that I totally agree with the Senator from Virginia. We have a very dangerous situation.

Mr. KAUFMAN

Mr. KAUFMAN. We all agree the present bill is a good bill and has a good resolution authority that has been worked on for years. My basic concern is we need a little prevention in the mix. As I said before, when people say we cannot compete overseas, do we want to go where the Royal Bank of Scotland went? The Royal Bank of Scotland was 1\1/2\ times the UK economy when it went down. Do we want to get into this mix in Europe? Is this the place we want to be with these banks facing the problems they are going to have right now, as we went through this earlier? Is this the place we want to be? I think we go back to what Senator Dorgan was saying earlier, and I wish to add to that with a couple comments. Once again I quote Alan Greenspan. He said: ``Too big to fail, too big.'' ``Too big to fail, too big.'' The idea that we should turn this over to the regulators and let the regulators set the rates--that is the alternative. The alternative is to let the regulators do it. We have good regulators now. I think that is fine. Remember several things. No. 1, the regulators did nothing. The regulators had the power to do most of what we are talking about. They did nothing in the past. The second thing is, we could have a new President come in and adopt the same policy as before that self-regulation works, hire a bunch of regulators to go in there, such as a number of regulators we had in our regulatory agencies--they were not bad people. They were smart people. They just basically believed self-regulation works. To quote Alan Greenspan for the third time in this speech, he said: ``I really thought self-regulation would work. I'm dismayed that it didn't.'' We can have it come back. There are still people today who believe-- we hear it sometimes on the floor--we do not need these regulators. The example I use is a football game where somebody gets up and says: The referees keep blowing the whistle and stopping the play. Let's get the referees off the field and play football. That is what was going on around here. As many of my colleagues on the other side point out, there was not enough oversight on these regulators. But you pull the football referees off the field, maybe the first pileup will not be bad, but by the time you get to the second and third pileup, I do not want to be in it. I think we ought to go back to what our colleagues did in 1933, and we should regulate not for 5 years, 10 years, 15 years; we should regulate for generations. Much of the stuff in this bill does regulate for generations. We should put in the bill hardline, adopted by us to send a message for generations that this is not going to happen again. Bear Stearns is not going to be able to leverage up to 40 times their capital base. That is what we need to do. We need to legislate for generations. Madam President, I yield the floor.

Mr. KAUFMAN

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

Mr. KAUFMAN. This week, once again, we celebrate Public Service Recognition Week. Public Service Recognition Week provides us all a chance to reflect upon the contribution made by those who serve in government. All throughout the week, the Partnership for Public Service, a leading nonprofit, nonpartisan organization dedicated to honoring those who work in government, will be hosting informative programs across Washington. One of the most exciting moments during the week is the announcement of this year's finalists for the distinguished Service to America Medals, or ``Sammies.'' This year, once again, the crop of finalists is outstanding, and the winners will be announced at the Partnership's annual Service to America Gala in September. During last year's Public Service Recognition Week, I delivered the first in a series of weekly speeches from this desk honoring great Federal employees. Now, 1 year later, I am proud to continue this effort today by recognizing my sixtieth great Federal employee, along with a few others who have won Service to America Medals in the past. Anh Duong has worked for the Naval Surface Warfare Center, in Indian Head, MD, for 27 years. But her relationship with the U.S. Navy goes back farther. She came to this country after escaping Vietnam as a teenager, having fled by helicopter to a Navy vessel off-shore. After coming to the United States, Anh obtained a degree in chemical engineering and computer science from the University of Maryland. After graduation, Anh began working at the Naval Surface Warfare Center as a chemical engineer, and from 1991-1999, she oversaw the Center's advanced development programs in high explosives. From 1999- 2002, she worked as the head of its programs to develop undersea weapons. After the September 11 attacks, when our Armed Forces were given the mission to defeat the Taliban, it was Anh who was asked to develop a thermobaric bomb that could be used to reach deep into Afghanistan's mountain caves, where Taliban fighters were hiding. She and her team were only given 100 days to prepare such a weapon for use. They did it in 67 days. Since 2006, she has been working with the Naval Criminal Investigative Service to create mobile battlefield forensics labs to help quickly identify those behind terrorist attacks. Anh Duong was awarded the Service to America Medal for National Security in 2007. Another dedicated Federal employee, who won the Service to America National Security medal in 2005, is Alan Estevez. Alan is the Principle Deputy Assistant Secretary of Defense for Logistics and Military Readiness. The old adage says that ``an army runs on its stomach.'' In fact, a modern military runs on much more than that. There are thousands of pieces of equipment and supplies that need to be transported in and out of an area of operations. Alan has been working since 1981 to make our military logistics system more efficient. Over the past several years, Alan has overseen efforts to implement radio frequency identification, or ``RFID'' technology into our military supply chain. He saw that companies like Wal-Mart were using RFID to track products with a high degree of accuracy and to reduce waste. Alan's work over the past three decades has saved the military, and the taxpayers, countless dollars and has helped ensure that our troops have the supplies they need to fulfill their missions. Another Service to America medalist I want to highlight today is Riaz Awan. He served as the Energy Department's attache in the Ukraine when he won a Sammie for his work to secure the site of the 1986 Chernobyl meltdown. Riaz won the 2003 Service to America Medal for International Affairs, which recognized the several years he spent living near the site of the Chernobyl disaster and working with the local communities to mitigate its social and economic impact. As part of his work, Riaz oversaw the construction of a new concrete shelter over the former Chernobyl reactor, one of the largest and most complex engineering projects in the world at the time. Additionally, his work on nonproliferation in the Ukraine has helped prevent terrorists from getting their hands on nuclear materials leftover from the fall of the Soviet Union. In the same year that Riaz won his award, the Service to America Medal for Call to Service, which recognizes new Federal employees, was won by Alyson McFarland of the State Department. Alyson had only worked at the State Department for 3 years when she found herself in the middle of a tense diplomatic situation. She was working as a program development officer at our consulate in the northern Chinese city of Shenyang, near the North Korean border. One summer day, in 2002, three North Korean refugees jumped over the consulate wall, seeking asylum. Alyson was one of the only Korean-speakers working in the consulate, and she quickly became instrumental in communicating with the refugees and authorities from the Chinese and South Korean governments. By playing a key role in supporting the negotiations with the refugees and government officials, she helped enable the asylum-seekers to reach freedom in South Korea. At the time of the incident, she was only 28 years old. The fifth and final story I want to share today is about the winner of the 2002 Service to America Medal for Justice and Law Enforcement. Special Agent Robert Rutherford won it for his work at the U.S. Customs Service, which has since been renamed as U.S. Customs and Border Protection. Robert served as the Group Supervisor for the Customs Service's Air- Marine Investigations Group in Miami, and his primary job was to keep illegal drugs from reaching American shores. Starting in 1999, Robert began noticing a sharp rise in the amount of cocaine and other narcotics being smuggled into the country from Haiti, which was contributing to a rise in local crime. On his own initiative, Robert worked with his colleagues to form Operation River Sweep to block the Miami River as a trafficking route for drugs. As part of the operation, he led a first-of-its-kind intra- agency task force under the direction of the Customs Service. Between 1999 and 2001, Operation River Sweep made over 120 arrests and prevented over 13,000 pounds of cocaine from reaching Florida communities. As Robert's efforts met with success, the local crime rate dropped. In order to stay afloat, the drug traffickers adapted their methods, hoping to outsmart the Customs Service. However, in 2001, Robert launched a second task force, Operation River Walk, involving over 300 law enforcement personnel from local, State, and Federal agencies. This second task force arrested over 230 trafficking suspects and seized over 15,000 pounds of cocaine and cannabis. Though the details are different in each case, all five of these stories about Service to America winners send the same message. It is a message of service above self, of motivation to carry out the people's work. When I first spoke about Federal employees a year ago, I noted the importance of the oath taken by all those who serve in Federal Government. The spirit of that oath, to ``support and defend the Constitution'' and ``faithfully discharge the duties of the office,'' undergirds the service of every man and woman who has worked as a Federal employee since 1789. Our work in Congress today is the drafting of a blueprint for recovery, security, and prosperity. The task of building and maintaining these edifices we design will belong to the dedicated and industrious civil servants upon whom all Americans daily rely. They are the regulators who will restore stability to our financial system. They are the lawyers who will prosecute terrorists detained overseas. They are the doctors and nurses who will care for our returning veterans. They are the aid workers who spread hope and healing around the world. They are the instruments by which we, the people, secure the ``blessings of liberty.'' As we mark Public Service Recognition Week, let us all make an effort to thank those who have chosen the path of public service. They are all truly great Federal employees.

Mr. KAUFMAN

Mr. KAUFMAN. Madam President, I have a comment. I see common cause here with the other side of the aisle. When I talk to colleagues on the other side of the aisle, it is not just the small businesses, it is the small banks that get hurt by these massive banks. I am a market guy. I am a free market guy. It is one of the things that made this country great. There are two things, democracy and our capital markets. We almost lost our capital markets in 2008. We cannot afford to risk that again. I look to the markets to tell me. Do people think these six banks are too big to fail? What does the market say? Not me or some industry. See what the market says about too big to fail. Dean Baker and Travis McArthur, of the Center for Economic and Policy Research, compared the borrowing costs of the 18 largest banks, all of which have over $100 billion in assets, to smaller banks, which make up the vast majority of banks in America. They estimated that the effect of government subsidy, because of the implicit guarantee that they are too big to fail--and this is what the market says, not me or Senator Brown--guess what. It results in a 70-to 80-basis point borrowing advantage for smaller banks, resulting in lower borrowing costs, equaling approximately $34 billion over smaller banks. Right now these big banks, because the market says they are too big to fail, don't worry, ABC down on the corner, they give them a rate. But when it comes to the 6 big banks, they give them 70 to 80 basis points less because they know they can fail.

Mr. KAUFMAN. I thank the Chair.

Mr. KAUFMAN. I thank the Senator. I think Senator Brown has given a presentation that is perfect and that explains this. I am just going to make a few points. I gave a speech on the floor yesterday, if anybody is interested in more detail. Let's look at some charts that kind of take what Senator Brown says and slices and dices it in a slightly different way. This is the average assets relative to gross domestic product of U.S. commercial banks. Would anybody like to guess when Glass-Steagall was repealed? How about right about here. I don't know if my colleagues have seen the charts. One of the reasons I thought there was a housing bubble is, if you look at the charts on the housing industry in America, the price of housing in this country from 1990 until about 2003 was just like that and then it went right through the roof. This is a very bad sign in anything. The fact that our banks are operating this thing is truly scary. Let me show my colleagues another chart. This is average assets relative to GDP. This is the concentration of the U.S. banking system. Does that chart look familiar? Let me tell my colleagues the worst thing about this. This does not include what we did during the meltdown, when we took Washington Mutual and pushed it into JPMorgan Chase, when we took Merrill Lynch and pushed it into Bank of America, and when we took Wachovia and pushed it into Wells Fargo. That doesn't even include this. We can only imagine where this line would be now. I have to get the chart updated. This is incredible. Of course, the red line is when we passed Glass-Steagall. So the clear indicator is Glass Steagall. In 1929, we had a credit meltdown in this country. Our forbears on this very floor said we have to do something about it. We have to pass laws, not go back to the regulators who didn't serve us well over the last 8 years--no, no. We have to pass laws. So we passed Glass-Steagall that not only said you can't be a commercial bank and an investment bank under the same roof-- which, when I was in school, we learned was one of the basics for our success and why we went 60 years without a bank panic, which we had all through the 19th century and right up to 1929. We should not have investment banks and commercial banks under the same roof. Commercial banks should be there to protect the small investor, the small depositor, make sure it is safe, and that is why we gave it guaranteed FDIC insurance. We never thought we would have FDIC insurance for an organization that had investment banking in it. Commercial banking should be a low-risk, basically low-return business. That is what we wanted. That is what the vast majority of Americans have at their local bank. It should not be included under the same roof as an investment banking operation that is high risk, high return. We could have had this argument 5 years ago, and I would have said: Oh, that is a good argument. Let's talk about it. Let's see what happened and how we got to where we are. The other sentiment we hear, just to expound on some of the points made by my colleague from Ohio: We can't break up the banks. You don't understand, Ted. We need these banks to compete internationally. Let me get one thing straight. Do my colleagues know what we are going to do under our bill if Brown-Kaufman passes? We are going to ask Citigroup to go back to what they were in 2003. Was Citigroup competing internationally in 2003? I think they were. So we are not saying we are going to take them apart. All we are trying to do is get them back to what they were. Goldman Sachs. The balance sheet of an investment bank such as Goldman Sachs will be scaled down from $850 billion to a more reasonable level of above $300 billion or around $450 billion. That sounds pretty draconian, right? We are asking them to go from $850 billion down to $450 billion. Would anybody like to guess what Goldman Sachs' assets were in 2003? Would you believe $100 billion? We are allowing them to grow to 3\1/2\ to 4 times the size they were in 2003. One of the people who didn't do real well during this last crisis was Alan Greenspan. He is the one who said self-regulation works. He said a whole lot of other things, but he said two very important things regarding where we are right now. One of them is the quote Senator Brown used: Too big to fail is too big. This is Alan Greenspan. This is not some populist in bib overalls, with a pitchfork in the middle of the streets raising his hands. This is Alan Greenspan. I have to read this. You have to believe this. The next time somebody tells you we need these banks to compete and they need economies of scale, listen to what Alan Greenspan says: For years the Federal Reserve had been concerned about the ever larger size of our financial institutions. Alan Greenspan: Federal Reserve research has been unable to find economies of scale in banking beyond a modest-sized institution. There is a fellow named Andrew Haldane, who is the executive director of the Bank of England. Do my colleagues know what he says the size is? He says $100 billion. That is what Haldane says. I commend everybody to read his report. It is very good. Just realize right now we have banks in this country that are $2 trillion and Haldane says $100 billion. Greenspan says we can't find economies of scale beyond a modest-sized institution. Alan Greenspan: A decade ago, citing such evidence, I noted that megabanks being formed by growth and consolidation are increasingly complex entities that create the potential for unusually large systemic risks in the national and international economy should they fail. That is exactly what Senator Brown and I have been saying and what a number of us have been saying about where we are. But this is Alan Greenspan: Regrettably, we did little to address the problem. I just hope 2 years from now--I will not be here--somebody on the floor will not be saying: Regrettably, in 2010, we did little to address this problem. This seems, to me, to be so incredibly complex but at the same time so incredibly simple. I just ask my colleagues, every time someone says something about the Brown-Kaufman bill, Maria Cantwell and John McCain's bill or the bill being offered by Senator Levin and Senator Merkley, ask this question when they start laying out the problems: Are our banks too big, No. 1; and No. 2, are they too big to fail? I thank the Chair.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, last week, at an event of the Delaware Chapter of Common Cause, I had the pleasure of introducing the recipient of their prestigious Open Government Award, John Taylor. It is hard to believe that it has been 40 years since I saw John Taylor on TV and signed up as an original member of Common Cause. It has been a great ride for Common Cause and especially for its Delaware chapter. My home State's chapter of Common Cause is known for its efforts to hold the government accountable and make sure that it is as ethical and transparent as possible. Admittedly, I am biased, but I know that the group is doing a great job. From tackling campaign finance reform to election reform, the members are working on the tough but important issues. From the beginning they have had excellent people on board who know how to get the job done. I am not the only one who thinks this. In a February 2010 article in the News Journal, their group was termed the ``Who's Who of academia, business and government.'' John Taylor truly belongs on the ``Who's Who'' list for Delaware, and Common Cause's selection of him for its Open Government Award could not have been more appropriate. Most Delawareans know John from his 22-year stint as editorial page editor at the News Journal. It was obligatory in Delaware to see what John Taylor had to say each week--and he did it in 700 words or fewer. John is a traditional journalist in many ways, starting his career as a freshman reporter in 1966. He fought to get to the bottom of the story, paid close attention to the details, and possessed that sixth sense to know where the real stories lie. But he also took time away from the newsroom to pursue his other passion of education. From the late 1960s to the early 1970s, he served as assistant to the superintendent of the Wilmington Public Schools. Before joining the newspaper business, he taught English and history at St. Mary's Secondary School in Tilbury, England. His awards and honors are too many to name here, but he has received the Helen Wise Friend of Education Award from the Delaware State Education Association and four Mark Twain Awards for column writing from the Associated Press. He was also the 1999 recipient of the Chairman's Award from the United Way of Delaware. After a triumphant and successful career in the news business, John found another calling in the realm of public policy and government. Today, he is a senior vice president of the Delaware State Chamber of Commerce and executive director of the Delaware Public Policy Institute. He is the driving force behind Vision 2015, and the children of Delaware will have increased opportunities because of his efforts. It only makes sense that, after decades of writing and following politics, he would pick up a thing or two. I am pleased to see that his skills are being well used at a center that promotes the discussion of policies, programs, and issues affecting the State of Delaware. The entire Delaware community has profited from John's efforts. From his serving on the Delaware Community Foundation Board of Directors and the Christiana Care Board of Trustees, to the boards of environmental, health, community, and educational groups, John has been an advocate for some of the most important issues of our day. He did not just write about what was or wasn't happening, although that is important: he has also pitched in to create positive headlines on his own terms. John Taylor undoubtedly deserves his most recent honor of the Open Government Award. In his long and distinguished career, he has written about those in government, held their feet to the fire, and followed up to make sure that they were held accountable. He has taught tomorrow's leaders, interviewed the movers and shakers of yesterday, and now informs the policy makers in our day. I extend my congratulations to the national Common Cause organization on the occasion of its 40th anniversary and to John Taylor for his achievement.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I rise once again to recognize the service of one of America's Great Federal Employees. So many of our outstanding Federal employees spend their careers in our uniformed services, standing at the ready to guard our liberties and protect lives. One of these services has a unique mission that combines coastal defense, maritime search and rescue, and environmental protection. I am speaking about the U.S. Coast Guard. The 42,000 men and women who serve in the Coast Guard embody the highest principles of our nation. Their dual responsibilities in both civil and military matters require Guardians to demonstrate flexibility, patience, and resolve. This year is 95th anniversary of the Coast Guard's creation from the old Revenue Cutter Service. That earlier service evolved from our nation's first maritime force in the infant years of our republic. The Federal employee I have selected to honor this week served as Chief of U.S. Flag Deepdraft Vessels and Plan Review for the Coast Guard at the time of the September 11 attacks. Kenneth Concepcion was based on Staten Island, within view of the twin towers of the World Trade Center. On that fateful morning, Kenneth was the first Coast Guard employee on the scene, arriving at New York's Pier Eleven just 20 minutes after the collapse of the second tower. What he found there was disorder and masses of frightened people with no way to get home. Kenneth took charge and recruited NYPD officers and Transportation Department officials to help him organize the crowds into lines based on intended destination. He assumed control of all the vessels at the pier and prioritized the safe evacuation of first- responders who had been injured in the attacks. Thanks to Kenneth's leadership and steady hand, the Coast Guard was able to evacuate 70,000 people from Lower Manhattan that morning to points across the Hudson River. In addition, he made sure that commercial ships continued to have safe passage in and out of New York Harbor, keeping some of America's vital ports open for business. But Kenneth's heroism doesn't end there. Two months after the attacks, American Airlines flight 587 crashed tragically near JFK airport in Queens. Kenneth served as the on-scene coordinator for the maritime recovery of debris. Under his leadership, and as a result of his ability to get different agencies to work well together, all significant debris from the crash was recovered in less than 2 days. Our Coast Guard members, like Kenneth Concepcion, stand ever at the ready to keep our maritime interests safe and to serve as our Nation's first line of search and rescue when disaster strikes. We rely on them to protect us, and I hope my colleagues will join me in thanking Kenneth and all members of the Coast Guard for their service to our Nation. They are all truly great Federal employees.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I rise to discuss Wall Street reform, because we must get this bill right if we are to prevent another financial crisis like the last one, which almost destroyed our country. The newspapers are filled with reasons why this is so important: In Europe, because a sovereign debt crisis is threatening to become a full-blown bank crisis, the governments of the EU are using taxpayer funds to bail out Greece. The hearings before Chairman Levin's Permanent Subcommittee on Investigations have riveted the Nation on fraud at the heart of the financial crisis; the widespread use of fraudulent stated-income loans by Washington Mutual; the abject failures of the bank regulatory agencies; the willful neglect of the credit rating agencies; and, finally, the hopelessly conflicted practices of Goldman Sachs, which put its own trading activities above any sense of duty to its customers. In particular, over the past few weeks, much has been spoken and written about solving the problem of banks that are ``too big to fail.'' As many of my colleagues know, Senator Brown and I, along with Senators Casey, Merkley, Whitehouse, and Harkin, introduced a bill to place strict limits on the size and leverage used by systemically significant banks and non-banks alike. We are now offering this legislation as an amendment to the financial reform bill, because we believe that Congress must reduce these megabanks to a manageable size and cap the leverage they may use in order to limit the risk they pose to our economy. We should never again have banks that are too big to fail. As the recent investigations by Chairman Levin, the Financial Crisis Inquiry Commission and others have shown: Even the best-intentioned regulators are no match for gigantic financial institutions, which are structurally complex, functionally opaque, and global in scope. Just as importantly, these financial institutions purposely operate to evade regulatory oversight by means of regulatory arbitrage, accounting and reporting practices that frustrate transparency, and so-called financial innovation that regulators have no chance of fully grasping in real time. To surrender our Nation's economic security to unelected and mostly unconfirmed regulators is both unwise and undemocratic. It is also a gamble. For those of my colleague who do trust the current set of regulators and have faith in them,--I am sure of those. I trust our regulators.--I would ask: Who will be the next president? Which regulators will he or she name to oversee the largest banks? What will be their regulatory philosophy? And how much determination and enthusiasm will they bring to the task of forecasting bank risk and risk to the U.S. economy? I submit, no can answer those questions. And while resolution authority is necessary, why would we believe that it will work for a $2 trillion megabank with operations in more than 100 countries? And as we saw just months ago, such banks do not simply fail on their own. The very problems that affect one megabank, such as a fall in the value of widely held assets like mortgage-backed securities, will affect every other big bank at the same time. That is what is happening in Europe today. The EU has decided to bail out Greece, before the panic spreads to Portugal, Ireland and Spain. That is why to me the choice is clear. We must do more to act preventively. Making the largest banks smaller is a necessary, but not sufficient, proposal. It is a complementary idea to the regulatory solutions contained in the current bill, which is a good bill. In the 1930s, this body had the courage and foresight to pass laws that maintained U.S. financial stability for generations. But a decade ago, too many forgot the wisdom of those laws. That is our challenge today in the Senate. We can either do nothing, which would be dangerous and irresponsible. Or we can direct the regulators to do a better job, which may work for a time. Or we can build a strong, clear safeguard to secure the American economy and to protect the American people from ever having to bail out megabanks again. The current bill has many provisions that I support, but, as Moody's reports, ``the proposed regulatory framework doesn't appear to be significantly different from what exists today.'' We must go farther. The Brown/Kaufman amendment is not as dramatic as it seems nor is it, I believe, fraught with unintended consequences. Very large banks will still exist under this bill. But they will not be so big that they are ``too big to manage and too big to regulate,'' as former FDIC Chairman Bill Isaac has said. And the leverage they use, the ratio of capital to assets, which is the very basis for how risky they become, will be statutorily capped. In fact, the extra layer of protection provided by this legislation is the least we should do. Under Brown-Kaufman, big financial conglomerates like Bank of America and Citigroup will still have balance sheets that exceed $1 trillion, about half of their current size. In other words, Citigroup would be about the size that it was in 2002, when it was still very competitive in the U.S. and overseas. The balance sheet of an investment bank like Goldman Sachs would be scaled down from $850 billion to a more reasonable level of just above $300 billion, or around $450 billion if Goldman exits the bank holding company structure. Lest anyone think that this is punitive: Goldman Sachs's assets didn't exceed $100 billion until 2003. That means under the worst case of this bill, their assets will be three times as big as they were in 2003. The firm is currently well over 10 times the size it was when it went public just over 10 years ago. A recent report by Andrew Haldane, the executive director of Financial Stability at the Bank of England, has two charts depicting the incredible growth and concentration that occurred within our financial system over the last 10 to 15 years. The first chart shows how the averse size of a commercial bank relative to GDP has tripled over the 15 years. By the way, this looks very much like the chart we had on housing process right before the big crash. Look at that exponential growth. If you want to see what happened, 1999 was when we repealed Glass-Stegall. Of course, this increase was driven by the growth of the megabanks, not by the growth of community or regional banks. The second chart shows how concentrated the U.S. banking system has become in just 10 years. The top three banks represented approximately 20 percent of overall bank assets in 1999, the time of the repeal of the Glass-Steagall Act. In fewer than 10 years, this percentage has doubled, with these top three banks now representing more than 41 percent of total bank assets. And the government's response to the financial meltdown has only made the financial industry bigger? None of this includes what happened in the meltdown: JP Morgan swallowed Bear Stearns and Washington Mutual; Bank of America absorbed Merrill Lynch; and Wells Fargo bought Wachovia. Why would we want financial institutions this gigantic? And people are telling me how do you unravel this? First thing we are going to do is now that the finance is set, undo these things we did during the financial crisis. That is not for me to decide. What we should do is put the limits up there and let people decide how they are going to reach the limits. The last 2 years proved beyond dispute that management and risk committees at America's most prestigious firms were unable to effectively track, measure, and mitigate their exposures. As Andrew Haldane recently noted: ``risk and counterparty relationships outstripped banks' ability to manage them. . . . Large banks grew to comprise several thousand distinct legal entities. When Lehman Brothers failed, it had 1 million open derivatives contracts.'' Former Treasury Secretary Robert Rubin recently admitted: ``There isn't a way for an institution with hundreds of thousands of transactions a day involving something over a trillion dollar that you are going to know what's in those position books.'' That is Robert Rubin one of the smallest men I have ever met on finance and also on the Government's approach to finance. If leaders of these massive financial institutions have no idea regarding their systemic risk, what hope do regulators have? The truth is that these financial institutions have become so large and complex that regulators rely upon the banks and the markets to self-regulate. Under the Basel II Capital Accord, determinations on capital adequacy became dependent on the judgments of rating agencies and, increasingly, the banks' own internal models. Modeling is fine, so lone aa the banks stay between bright lines which should be drawn by Congress. Otherwise, if regulators issue rules governing capital requirements that depend on the banks to use their own models to determine adequacy of their capital and liquidity, then as a practical matter such regulation becomes meaningless, and is no longer regulation. Indeed, regulators have long had all the tools they need to increase capital and restrict banks from engaging in activities that pose a serious risk to the safety, soundness or stability of a bank holding company. But they failed to do it. The regulators failed for many reasons, but they failed in part because so much of the risk is hidden and difficult to understand. Institutions like Lehman and Citigroup brazenly engaged in accounting gimmicks to evade regulations that were imposed on them. Lehman implemented ``Repo 105'' to hide the true extent of its liabilities at the end of each reporting quarter. At the end of each reporting quarter, they came up with something so that they could take liabilities off the balance sheets so regulators and even shareholders did not know what their true economic position was. In the second quarter of 2008 alone, it moved $50 billion temporarily off of its balance sheets without telling regulators, ratings agencies, or even its own board or shareholders. SEC and Federal Reserve regulators stationed at Lehman Brothers never caught on. And the Lehman CEO claimed he never knew about it. Is it not amazing, a CEO of a corporation, all of the money he is making, $50 billion each quarter off the balance sheet being hidden, and he never knew anything about it. At the same time, Citigroup and others held more than a trillion dollars in off-balance-sheet vehicles to avoid capital requirements for lending. When market conditions soured, tens of billions of dollars in liabilities suddenly appeared back on their balance sheets to the surprise of regulators and shareholders alike. Some argue that it is the quality of those regulatory standards that must be improved, and that they must be finely tuned and calibrated if they are to affect the behavior of the large banks. Assistant Treasury Secretary Michael Barr recently noted, markets will ``undoubtedly evolve'' beyond what any law says. But, he said, regulators are now pushing for new global capital standards that will be ``more robust, higher and better quality, less pro-cyclical, and include global agreement on a leverage ratio.'' That will be very helpful, but it is not a solution. The history of financial regulation has proven that strong and sweeping statutory standards are far tougher to evade than technical regulations that prescriptively set requirements. The Financial Times reported recently that banks are already developing new ways to arbitrage the global capital standards to which Secretary Barr refers. In other words, they are finding ways around the rules before they are even finalized. That is why we need statutory standards on the leverage and size of these megabanks, as provided in the Brown-Kaufman SAFE Banking Act. While some technocrats may say that they are blunt tools, I say that that is precisely the point: the amendment provides a clear line that banks can not evade and regulators can not ignore, thereby making both accountable. The Federal Government cannot continue to subsidize these mega-banks and permit them to grow by taking on ever greater risk and speculation. Dean Baker and Travis McArthur of the Center for Economic and Policy Research compared the borrowing costs of the 18 largest banks, all of which have over $100 billion in assets, to smaller ones. They estimated that the effective government subsidy because of the implicit guarantee that they are too big to fail results in a 70-80 basis point borrowing advantage over smaller banks, resulting in lower borrowing costs equal to approximately $34 billion. We are not saying they are too big to fail, what the market is saying, if you are a bank that is big enough so it looks like it is too big to fail, you can borrow for 70-80 basis points less than smaller banks. Fed Chairman Bernanke has noted that this is unfair competition to smaller banks. I agree. I wish I would hear more from smaller banks. As a result, less money flows to local communities, and small businesses have trouble getting affordable loans. Nonetheless, there are still those who argue that we need megabanks, that there are economies of scale that allow $2 trillion banks to better service large U.S. global corporations and help us compete globally. They offer no evidence to support this claim, however, because there is none. At least I have not been able to find any. There are no academic studies proving that in banking, bigger is better and more efficient beyond $100 billion in assets. While big corporations on some occasions need to access particularly large amounts of capital, Wall Street banks typically form syndicates to spread the risk. And while megabanks have large balance sheets that might allow them to take on a large amount of underwriting risk, it is not clear whether this is good for the customer or the financial system as a whole. By having lots of smaller institutions participate in an underwriting, the corporate customer is apt to get better pricing because it will be accessing a wider variety of retail and institutional distribution channels. The financial system is also safer by not having large concentrations of proprietary positions in loans and securities, or even worse, by having these institutions ``hedge'' those large exposures with esoteric products that no one understands and that are often hidden off balance sheet. Nor is there research that demonstrates that the U.S. needs large banks in order to ``compete'' with massive foreign banks. It is true that only 6 of the 50 largest banks in the world are based in the U.S. Many banks on that list have a history of government involvement, some were even owned by their governments. Virtually all of these batiks benefit from implicit or explicit government guarantees. Many, including the largest bank on the list, the Royal Bank of Scotland, have been recipients of massive bailouts. Ireland is in the midst of a painful process of bailing out its largest banks. Switzerland put together an approximately $60 billion bailout package for one of its largest banks, UBS. The U.K.'s bailout support for its banks exceeds $1 trillion. The case of Iceland provides a cautionary tale for all nations on how a government can be completely overwhelmed by the collapse of its largest financial institutions. And while French and German banks have enjoyed only modest, direct bailouts, through the EU and IMF debt relief provided to Greece, these banks have received a massive, indirect government bailout. The Wall Street Journal reports that German and French banks carry a combined $119 billion in exposure to Greek borrowers and more than $900 billion to Greece and other vulnerable Euro countries, including Ireland, Portugal and Spain. French banks have almost $80 billion in exposures to Greece, while German banks have $45 billion in exposures to the country. Given these circumstances, other countries face just as urgent a need to break apart their megabanks. What about Canada, many ask? Its large banks did well during the last crisis. But there are significant differences in our two countries. First, there was no wave of financial deregulation in Canada. Canadian banks are subjected to tight mortgage origination standards and tough leverage limits, something U.S. financial institutions and their regulators completely ignored for the last decade. Second, in Canada the government insures the most risky mortgages, and I don't think we want to go back to doing that. Finally, not one of Canada's largest banks is near the size of any of the five largest U.S. banks. In fact, the largest Canadian bank is not even a third of the size of the largest U.S. bank. What's more, under the limits of the Brown-Kaufman Act, our megabanks would continue to be much larger than the largest Canadian banks. Some officials have argued that ``most observers'' think that breaking up the big banks would lead to more risk, not less; that bigger banks are more diversified and therefore less risky than smaller banks. That makes no sense to me. As the governor of the Bank of England, Mervyn King, recently observed, ``Banks who think they can do everything for everyone all over the world are a recipe for concentrating risk.'' That is one of the reasons why he, too, favors breaking up the megabanks as the solution to ``too big to fail.'' I believe the view of most observers is best summarized in the review of the literature in ``13 Bankers,'' the book by Simon Johnson and James Kwak. Breaking up the banks is not a populist idea in the pejorative sense of that word. It is supported by smart, informed people outside the Washington-Wall Street corridor who understand what is happening, including three presidents of the Federal Reserve Board and a host of economists and academics. Even Alan Greenspan, in his recent speech at the Brookings Institute looking back on ``The Crisis,'' stated clearly: ``For years the Federal Reserve had been concerned about the ever larger size of our financial institutions. Federal Reserve research had been unable to find economies of scale in banking beyond a modest-sized institution. A decade ago, citing such evidence, I noted that `megabanks being formed by growth and consolidation are increasingly complex entities that create the potential for unusually large systemic risks in the national and international economy should they fail.' Regrettably, we did little to address the problem.'' Anyone can come up with reasons for maintaining the status quo, for allowing oversized megabanks to continue to be too big to fail. But given the recent economic disaster, the burden of proof should fall on those who want to retain our currently dangerous concentration of financial power. Repeating the mantra of U.S. competitiveness and the idea that ``this is not about size but about risk and interconnectedness'' are only excuses for an unjustified failure to act. The question is what must we do to ensure that a financial crisis like the great recession, which continues to cause millions of people to be out of work and lose their homes, never happens again? The Brown- Kaufman amendment would add another layer of protection to our financial sector, and would make it much less likely that U.S. taxpayers will ever be asked to bail out Wall Street again. Brown-Kaufman is a modest, even conservative, proposal to restore the size of banks to where they were a decade ago. It will also impose a statutory leverage limit to prevent megabanks from taking on too much risk--a fact about our amendment that is often overlooked. Sometimes, the buck must stop with Congress. We can take strong steps to undo the harm of the last decade, or we can punt responsibility to the very regulators who failed us in the first place. Either way, the American people will hold us responsible. So let us act responsibly and protect them from further harm. I yield the floor and suggest the absence of a quorum.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, in the past couple of years, the economy took a turn for the worse, and the Community Legal Aid Society, Inc.--CLASI, for short--in my home State of Delaware, was hit with a triple whammy. More people needed help while there were fewer private and government contributions to go around. CLASI's executive director, Christopher W. White, faced these new, increasing, and difficult challenges bravely and with an amazing sense of determination. Some would say Chris did his best work when the going got particularly tough. Today, the Legal Aid Society is a wonderful and esteemed nonprofit law firm dedicated to providing advice to people with low incomes or disabilities as well as those who are elderly. The success of CLASI is in large part due to Chris's almost two decades of hard work, direction, and excellent fundraising abilities. His devotion to CLASI was clear during the recent recession, when he lowered his own salary so that others could keep their jobs. However, the Delaware and legal communities faced a tragic blow last week when Chris's life was tragically cut short on Wednesday, April 21. He was 48. You can't go far in Wilmington without hearing that Chris was a brilliant advocate and overall great person. When you talked with Chris, his passion and drive would rub off on you. He had the effect of making everyone who knew him want to become a better person. Much of this was owed to Chris's charisma. He was one-of-a-kind, and his intelligence never came off as pretentious. Everything that Chris did was driven by his heart--not politics or career-climbing--and a strong desire to make things better in his community. Chris was a preacher's son and a graduate of Boston College and Suffolk University Law School. During law school, Chris had a summer internship at Harvard Legal Aid, which changed his life. He could have been a private attorney with a high salary and a fraction of the workload of a public interest attorney. However, Chris devoted his entire professional career to Delaware's Community Legal Aid Society. Some of the highlights of his very bright career were when he argued before the Delaware Supreme Court. One of his passions was the issue of safe, affordable, and adequate housing. The original Legal Aid Society dates back to 1946, but just recently CLASI added the Fair Housing Program to enforce fair housing rights for all people regardless of race, color, religion, sex, national origin, age, disability, and familial status. This is in large part due to Chris's commitment to this issue. He was involved with many community development and housing organizations and took up the cause before the State general assembly. He wrote a new State law to settle conflicts between manufactured-home owners and landlords. He also reworked New Castle County's landlord-tenant code so tenants could better understand their rights. Chris's hard work was widely recognized by his peers. He received the New Lawyers Distinguished Service Award from the Delaware State Bar Association in 1999 and the Kind Policy Award from the Delaware Housing Coalition in 1997. Only days after his passing, one of his many projects was opened in downtown Wilmington. He had led the renovation of an abandoned commercial space into ``Shipley Lofts,'' a 23-unit artist community. The 1,500-square-foot gallery has been named the Christopher W. White Gallery in his memory, and the nonprofit organization that oversees the project has been renamed the Christopher W. White Community Development Corporation. Chris gave everything he had--mind, body, time, resources--to those without a voice. Tragically, he was hit by a car in front of the building he worked so hard to develop as a place of vitality and creativity. The loss of Christopher W. White is a great loss to Delaware. He will be truly missed. My sympathies go out to his family, friends, and colleagues, especially his wife Leandria and their children, Josh and Kayla, and his mother, Donna.

Mr. KAUFMAN

Mr. KAUFMAN. About 16 minutes.

Mr. KAUFMAN. Mr. President, I thank the Senator from Connecticut for the incredible work he has done on putting this bill together. It is a historic effort. It is the third historic effort he has taken on this year. That is not just a word, ``historic;'' it is putting into perspective the last 40 years. The Senator from Connecticut has been a leader on three truly historic pieces of legislation this year. I have never seen a Member do that. There were credit card reform, bringing up the health care reform bill, and now the financial regulatory reform bill. I return to the floor to discuss the problem of too big to fail, which I remain convinced is a key issue in any financial reform bill. First, I urge my colleagues to vote yes on the motion to proceed, because these issues are of profound importance to our country and they deserve to be debated and voted upon. For example, it was over 10 years ago that Congress debated and passed the Gramm-Leach-Bliley Act, which formally repealed the Glass- Steagall Act's sensible and longstanding separation of commercial banking and investment banking. While this landmark legislation passed the U.S. Senate by a 90-to-8 margin, there were some voices who spoke out then that the bill would lead us on a glided path to disaster. I recently reread the speech given in 1999 by the senior Senator from North Dakota, and I was thunderstruck, truly, by how accurately Byron Dorgan warned then about the future. There were eight people who voted against the Gramm-Leach-Bliley Act. They were Senators Boxer, Bryan, Dorgan, Feingold, Harkin, Mikulski, Shelby, and Wellstone. I first came to this body as a staff person in 1973. I have seen times when a few people in the Senate--I don't think either party has a monopoly on it-- get together and say the Senate is off in the wrong direction. Those eight people said that on that day. Senator Dorgan deserves a special recognition and award, because he predicted this in 1999, when he said: We will, in 10 years time, look back and say: We should not have done that [repeal Glass-Steagall] because we forgot the lessons of the past. He went on to say: This bill will, also, in my judgment, raise the likelihood of future massive taxpayer bailouts. It will fuel the consolidation and mergers in the banking and financial services industry at the expense of customers, farm businesses, family farmers and others. That is absolutely amazing. He absolutely totally completely nailed it. He predicted it would lead to ``future massive taxpayer bailouts.'' I think we should listen to Senator Dorgan now and any prediction he makes about what we are going to do today in the Senate. He also said quite presciently: We also have another doctrine . . . at the Federal Reserve Board called too big to fail. Remember that term, too big to fail. . . . They cannot be allowed to fail because the consequence on the economy is catastrophic and therefore these banks are too big to fail. . . . That is no-fault capitalism; too big to fail. Does anybody care about that? Does the Fed? Apparently not. These words would work just as well on the floor today. How many of us thought the term ``too big to fail'' was coined only in this recent disaster? Not Senator Dorgan. He knew and warned about too big to fail in 1999. He also said: I say to the people who own banks, if you want to gamble, go to Las Vegas. If you want to trade in derivatives, God bless you. Do it with your own money. Do not do it through the deposits that are guaranteed by the American people and by deposit insurance. Again, right on point, and perfectly accurate today. Byron Dorgan and Brooksley Born were warning about derivatives in 1999, but we did not listen, And America suffered a catastrophe of monumental proportions-- less than 10 years after these prophetic words were spoken. Finally, Senator Dorgan said: I will bet one day [I think we are at that day] somebody is going to look back at this and they are going to say: How on Earth could we have thought it made sense to allow the banking industry to concentrate, through merger and acquisition, to become bigger and bigger and bigger; far more firms in the category of too big to fail? How did we think that was going to help this country? Well, Senator Dorgan, you were right, and we have arrived at that day. Let me repeat: Did it help our country? Will it help our country in the future? Each Senator has to answer that question. Senator Dorgan knew that further unbinding the financial industry would accelerate the process of deregulation and lead to far greater risks, ushering in a new era of too big to fail and an ever more casino-like version of financial capitalism. He knew that by lifting basic restraints on financial markets and institutions and, more importantly, by failing to put in place new rules to deal with the market's ever more complex innovations, that this deregulatory philosophy would unleash the forces that would cause our financial crisis and great recession of 2008. I could not agree more with Senator Dorgan. Banks and other financial institutions that are too big to fail have become only more so today. They are so large, so complex, and so interconnected that they cannot be allowed to fail because their demise would threaten the stability of the overall financial system. There are those on the other side of the aisle who propose to simply let them fail. They say the solution is to stand back and let these megabanks follow the normal corporate bankruptcy process. I call that ``dangerous and irresponsible,'' a slogan of an answer, not a real solution. President Bush did not allow that to happen, and no President should be faced with that decision again. When Lehman failed, our global credit markets froze and creditors and counterparties panicked. We have the opportunity today to restructure our financial industry so that it will be safe for generations. That is what the Senate did in the 1930s when it passed the Glass-Steagall Act, and it withstood the test of time for six decades. When I look at the current legislative approach, in my view it relies too much on regulator discretion and on a resolution mechanism that is ultimately unworkable for the largest and most complex financial institutions. Under this arrangement, the megabanks will still have incentives to arbitrate their capital requirements, thereby continuing to grow and take on even greater and greater risks. The six largest U.S. banks have assets totaling more than 63 percent of our overall gross domestic product. Fifteen years ago, the six largest U.S. banks had assets equal to just 17 percent of gross domestic product. In 15 years, it went from 17 percent to 63 percent. Instead of girding a broken regulatory system, Congress must act decisively now to end the ``doom loop'' Senator Dorgan accurately identified and warned the Senate about in 1999. We need stronger statutory medicine. I believe the time has come for Congress to draw hard lines and high walls in statute. We need statutory size and leverage limits on banks and nonbanks in order to eliminate too big to fail. Senator Dorgan said he is working on an amendment to address this problem. I look forward to hearing more from Senator Dorgan about his proposals, and I hope the Senate will listen carefully to him since his credibility on this issue was born in the wisdom he showed in 1999. Congress, which represents the people who are most hurt by the financial crisis, should not pass the buck to the very regulators who failed to prevent the crisis in the first place. Congress must do it, as it did in the 1930s, by separating commercial from investment banking activities and putting limits on the size and leverage used by systemically significant banks and nonbank players alike. This is a proposal I introduced last week with Senator Brown and other colleagues. Of course, there are those who make the argument that the problem is not really about size; that these institutions are not actually too big to fail. Instead, they say institutions such as Lehman Brothers were actually too interconnected to fail based upon interlocking counterpart exposures arising from credit derivatives and repurchase contracts. But trying to contrast the distinction between too big to fail and too interconnected to fail is a distinction without a difference. The massive growth from the derivatives market, including that for credit derivatives, which intertwine the fates of banks, hedge funds, and insurance companies through side bets on whether mortgages, corporate bonds, or other assets would pay off, moved in lockstep with the runaway growth of the megabanks' balance sheets. All of these activities interconnected their fates, while also making them far more risky and far bigger, so big, in fact, that the failures would threaten the stability of the financial system. As Senator Brown and I emphasized last week, our bill is a complementary idea, not a substitute to the Banking Committee bill. There are many regulatory provisions in that bill that are designed to make the megabanks less risky and less interconnected, and we strongly support them. But why gamble that the regulators will do a better job now and well into the future when they have the power today to impose a redundant fail-safe solution to limit the size and leverage of our biggest banks? We will not lose out globally, other than in a race to financial destruction. The limits Senator Brown and I propose would shrink these banks from massively large institutions to only large institutions, at a size well beyond the level at which economies of scale are achieved. As Senator Dorgan asked in 1999: Why leave oversized institutions in place when they are too big to fail? Instead, we should meet the challenge of the moment and have the courage to act to limit the size and practices of those literally gigantic financial institutions, the stability of which is a threat to our economy. But we can only meet these challenges once the bill reaches the Senate floor. Again, I urge my colleagues to vote yes on cloture and not stand in the way of the debate and collective wisdom from this body that this country so badly needs. If we are to prevent another financial crisis, we must move forward with this debate and act strongly in the interests of the American people. Mr. President, I yield the floor.

Mr. KAUFMAN. Mr. President, I first came to this place in 1973, working for then-Senator Biden, and one of the things you learn around here, after you have been here a while, is the American people don't care about procedure. That is one of those things they don't care about--procedure. It is all too complicated. I don't blame them. Half the time, I don't know what the procedure is. Procedure doesn't work. But during those 37-some years, every once in a while something comes along where procedure matters. Our friends on the other side of the aisle have had a field day on procedure for the past 15 months I have been here, and they count on the fact that nobody in America cares about procedure. So what they have done is, time and again, they have filibustered motions to proceed. That is hard to explain to someone out in America. What is a filibuster on a motion to proceed? That is hard to figure out. So you can get away with that. You can filibuster on a motion to proceed and then you can filibuster on the bill and then filibuster on cloture and all these words mean nothing to most Americans. I am all for filibusters. I think it is important to maintain the rights of political minorities, and that is the way to do it. I say to my colleagues who are here and who want to change the filibuster rule, spend a year in the minority or 2 years in the minority and then come to me and tell me you want to change the filibuster rule. What people don't realize--those who want to change the filibuster rule--is that when one side or the other gets out too far, then the American people notice what goes on and they come in and they fix it. I am convinced that is what is going to happen today. I think the American people have figured out what it is my friends on the other side are doing. They are my friends. We just have a different point of view. Everywhere I go in this country, people are concerned about what happened--everywhere. They are concerned because they have so many friends and relations who lost jobs and other friends and relations who have lost their houses and they say: What are you going to do about it? What are you in Washington going to do about it? Don't you get it? Don't you understand what is happening here? You are not going to do anything about this? I have watched Senator Dodd work for hours and days and months--and, frankly, years--to try to put together a bill so we can vote on what will be a bipartisan bill. I have been hanging out at this place or teaching about it for 37 years, and I have never seen anyone work any harder to try to get a bipartisan bill. Frankly, Mr. Chairman, I got a little frustrated because it took so long. But Chairman Dodd did the right thing because I think he knew, at some point, if we didn't get agreement, we would be here and we would be faced with charges that this was a partisan bill. This is not a partisan bill. As you know, Mr. President, you and I have differences with this bill. The Presiding Officer and Senator Levin have an amendment to offer, which I am a cosponsor of, to change the bill. I have an amendment with Senator Sherrod Brown of Ohio to make some changes to the bill. Senator Cantwell and Senator McCain have an amendment that I am a cosponsor of. There are three amendments already that I am in favor of to change this bill. I have heard Chairman Dodd say time and again, this is not the perfect bill. This is a bipartisan bill. We have put a lot of effort into it. But he has welcomed the opportunity for people to come forward and offer amendments. I don't get it, how you can say you don't agree with a bill, but you will not let anything happen on it and on an issue such as this--an issue that is so important to the American people. It is so important that we get it right. It is time. Committees are great, and I support the committee system. I think they are wonderful. I think negotiations are great. I think the bipartisan negotiations that have been going on--and I know they are going on because I have seen them on the floor. I have seen there are about 10 or 12 members from the Banking Committee who are working. Chairman Dodd, in the beginning, set this up and he delegated it down so Senator Warner and Senator Corker were working together. He had a Republican and a Democrat working on each of these things. They are still working, as we talk now. But it is time for that to stop. It is time for us to get out in the open and be a Senate. It is time for us to debate these issues in the open. It is time for the Republican Party to decide if they want to do something about Wall Street reform. I hope they are listening. In my opinion, we should stay and discuss it until we are ready to go. We are going to disagree. One of the big things I am in favor of is returning to Glass- Steagall. When we voted on that in 1999, Senator Dorgan voted against it and Senator Shelby voted against it. These are not issues that are Republican or Democratic issues, in my opinion. I have talked to my colleagues on the other side about some of the amendments I am offering, and they say they are interested in them. I don't see this as being a partisan fight. I think it looks like a fight to get political advantage. I am very hesitant to bring that forward, but that is what it looks like to me. It looks like they do not want to vote, period. I know that is not true for certain Members on the other side. I know they wish to talk about these issues. So I wish to say to the American people tonight, it is time to contact your Senator and say: Let's bring financial regulatory reform to the floor. Let's debate the issues on it. Let's get to the amendments and let's pass it so millions of Americans who have lost their jobs and their homes know we in the Senate have done everything we can to make sure this never happens again. I yield the floor.

Mr. KAUFMAN

Mr. KAUFMAN. I agree with what Senator Brown is saying. This is a very complex bill. It is a very complex area. But what we are talking about is a very simple proposition. We can either limit the size and leverage of too big to fail financial institutions, such as the bill which Senator Brown and I are offering now will do or we will suffer the economic consequences of their potential failure later. I personally believe breaking apart too big to fail banks is a necessary first step in preventing another cycle of boom, bust, and bailout. Even if they do that, this bill is required if, in fact, we are going to limit too big to fail. This debate is a test of whether the power of that idea can spread and gain support. Although it is clearly the safest way to avoid another financial crisis, this idea must overcome tremendous resistance from Wall Street banks and their politically powerful campaigns against any kind of structural financial reform. Moreover, the idea must overcome the inertia and caution in a Congress drawn to easier ideas that may work. But how much should we gamble that they will work? Limiting size and leverage are fail-safe provisions to prevent a dangerous outcome. Senator Brown and I are proposing a complementary idea to limit the size and leverage, not a substitute for breaking the banks apart. The current banking bill has many important provisions we support. But under its approach, we must hope the financial stability oversight council can identify systemic risks before it is too late. We must hope that regulators will be emboldened to act in a timely manner when before, in the recent past, they failed to act. We must hope better transparency in financial data will produce early warning signals of systemic dangers so clear that a council and panel of judges will unhesitatingly agree. We must hope that capital requirements will be set properly in relation to risks that all too often remain purposefully hidden from view. We must hope that resolution authority will work, when we know it has no cross-border authority to resolve global financial institutions. Under the current bill, we must hope all future Presidents will appoint regulators as determined to carry out the same strict measures preached belatedly by today's regulators who have been converted by the traumatic experience of their own failures. All rules to restrict excessive risk taking in banking have a half life. That is because the financial sector is full of very smart people with an incentive to find their way around the rules, particularly to load up on risk, as this is what provides them their excessive profits and gigantic bonuses. I would rather not pin the future of the American economy on so much hope. I would rather Congress act now, definitively and responsibly, to end too big to fail. The changes in regulations envisioned today in the bill we are proposing would help initially, particularly until the next free market candidate who wins appoints regulators who only believe in self- regulation. This bill establishes hard lines. One of the greatest sayings is: Good fences make good neighbors. This builds the fences. Then we let the regulators do it, and we don't have to worry about the President picking the right regulators. Our bill would provide a legislative size and leverage restriction that would last far longer than the half life of who is appointed to be regulator. We want this to operate for a generation. In 1933, our forebears, after the Great Depression, made hard rules. They passed Glass-Steagall. They set up the FDIC. They set rules against margins, and they set the uptick rule. We should do no less. Remember, when they passed those bills in 1933, they helped us avoid a financial crisis for almost 50 years. Some argue we need massive banks, but recent studies show that with over $100 billion in assets--and by the way, these banks, as Senator Brown said, have over $2 trillion worth of assets--financial institutions no longer achieve additional economies of scale. They simply become dangerous concentrations of financial power that benefit from an implicit government guarantee that they will be saved if they fail. With this implicit guarantee, these firms will continue to have every incentive to use massive amounts of short-term debt to finance the purchase of risky assets. This bill would deal with their ability to be able to do that and would stop it. They would go on and be able to do this without us. They have done it in the past, and there is no reason to think they won't do it in the future until they cause the next crisis and taxpayers must bail them out again. While $100 billion banks would be smaller, they are not small banks. Such banks would have no trouble competing around the world. Under this bill, we would still have banks far bigger than even that size. People say: Look at other countries. Look what they are doing. Just because other countries subsidize megabanks banks that could send those countries spiraling into a financial crisis should not make us want to do the same. Everyone agrees--as the Senator from Arizona said--the most important thing is too big to fail. How much can we risk that by doing what other countries are doing, when they are creating banks that are clearly too big to fail? Most people in the oil industry did well under the breakup of Standard Oil, including its shareholders, and the breakup of AT&T helped the telecom industry become more dynamic, competitive, and profitable. The current Senate bill contains many important provisions that address the causes of the financial crisis, but why risk leaving oversized institutions in place when they potentially are too big to fail? Instead, we should meet the challenge of the moment and have the courage to act, as in this bill, to limit the size and practices of these literally colossal financial institutions, the stability of which are a threat to our economy. This bill is the best hope to ensure future decades of financial stability and the livelihoods of the American people. This bill will put the days of too big to fail forever behind us.

Mr. KAUFMAN. Lapdogs is another way of saying people who believe self-regulation will work. Alan Greenspan also was quoted as saying we should breakup the banks; Standard Oil wasn't bad. At the time he said, after it was over, a year later he gave a speech and said: I really thought self-regulation would work. I am dismayed that it didn't. The way I put it, it is as if there were a whole group of folks, not just in the financial regulatory area but all over the government, who basically believed the markets are great. I am a big believer in markets, but I also like football. The idea that someone would say: Football is great, but those referees keep blowing their damn whistles. Let's get the referees off the field so football players can be football players. We know what would happen if we pulled all the referees off the field in a game. I wouldn't want to be in the second pileup. That is what we said with this. We said we are going to pull the referees off the field and see what happens. These were good people. They just didn't believe they had to regulate, and we are now seeing the results. People say to us, when we propose these things--I have had several press people say to me--why don't we leave it up to the regulators? They can set these numbers. We shouldn't set these numbers. Let me read from a couple things. The 1970 Bank Holding Company Act amendments gave the Fed the power to terminate a company's authority to engage in nonbanking activities, basically doing what we are talking about doing, if it finds such action is necessary to prevent undue concentration of resources--I wonder if that went on recently-- decreased or unfair competition, conflicts of interest, or unsound banking practices. The Fed had the power to do this. They did not do it. The Financial Institutions Reform Recovery Enforcement Act also gave regulators the power to restrict an institution's growth and limit its size. What we are talking about now is giving the regulators essentially what they already have in the present bill. What Senator Brown and I are saying--and the other cosponsors--is, the buck stops here. We should tell the regulators what these percentages are going to be. Because if we leave it up to the regulators, as Senator Brown said, these are very powerful people and very powerful institutions. They hire the very best people to come and make their arguments. So if you are sitting there running a regulatory agency and you are saying: Oh my God, I don't want to do this, I don't want to shrink these things down--and remember one other thing too. As bad as things were in this latest crisis, think about what has happened during this crisis. They have all exploded. What did we have happen? JPMorgan Chase now includes Washington Mutual, a $400 billion bank. Bank of America now includes Merrill Lynch. We can go on from there. Wells Fargo now has Wachovia. These things were big. We had this mess. We deregulated. We put the regulators in. We changed laws. Now they are bigger. As the Senator says, their assets are 63 percent of the gross domestic product of this country. Fifteen years ago, they were 17 percent of gross domestic product. What do we have to do before someone sends the message that these things are too big and that this Congress not pass the buck to the regulators, who did not do the job in the past? Let me just say this. I think the world of our regulators now. I do not think there are people in regulating now who basically believe they should not be regulated. In 1933, we made a decision that helped us through three generations. What are we doing as Senators on the floor passing legislation based on the fact: I trust my regulators now. Why are we not passing legislation that will work over the next two or three generations--something that will work whether we get a President who believes in the fact that we should have a market or not, whether we have a good regulator or a bad regulator? Why shouldn't the Senate of the United States do its job and basically lay out restrictions of the kind that are in this bill so the regulators have them? Then they can enforce it. They can do the enforcement, which is their job. We should send a clear message to people that this is what we have to do.

Mr. KAUFMAN. We just have to give the regulators the tools they need to do their job, and the guidelines because we know what these guidelines are. These are not really terribly strict guidelines; they are just to have the ability to stop what is going on now, to get banks back to the size where they can be managed. As Senator Brown said, these banks have a competitive advantage because when they are too big to fail, not only do we have to worry about bailing them out, but all their interest rate charges are lower. We know that. The interest rate charges on CDs with these major banks-- they get higher interest rates than the other banks, and it is unfair competition for all the other small banks around this country. As I said in the beginning, this is a very simple proposition: Is the Senate going to do its job to make sure we have in place the ability to keep these banks from being too big to fail and preparing so we never have to get to the resolution authority?

Mr. KAUFMAN. By the way, let me say one thing about that. I am not for overregulation. But can you imagine, if we have another problem, what the regulation would be like then? Do you know what the proposals would be on this floor if, in fact, we have another problem? It would be draconian. It is important for all of us. We all care about our capital markets. One of the things that drive this country and make us great is the capital markets. We want them to be credible and we want them to be fair and we want them to work. So we want to make sure we do not get faced with this. I think that is exactly what Senator Brown and I are trying to do. We are trying to do a little bit of prevention here so we never get to that end of the road where we have to get involved in resolution authority.

Mr. KAUFMAN. Right.

Mr. KAUFMAN

Mr. KAUFMAN. I agree with what Senator Brown is saying. This is a very complex bill. It is a very complex area. But what we are talking about is a very simple proposition. We can either limit the size and leverage of too big to fail financial institutions, such as the bill which Senator Brown and I are offering now will do or we will suffer the economic consequences of their potential failure later. I personally believe breaking apart too big to fail banks is a necessary first step in preventing another cycle of boom, bust, and bailout. Even if they do that, this bill is required if, in fact, we are going to limit too big to fail. This debate is a test of whether the power of that idea can spread and gain support. Although it is clearly the safest way to avoid another financial crisis, this idea must overcome tremendous resistance from Wall Street banks and their politically powerful campaigns against any kind of structural financial reform. Moreover, the idea must overcome the inertia and caution in a Congress drawn to easier ideas that may work. But how much should we gamble that they will work? Limiting size and leverage are fail-safe provisions to prevent a dangerous outcome. Senator Brown and I are proposing a complementary idea to limit the size and leverage, not a substitute for breaking the banks apart. The current banking bill has many important provisions we support. But under its approach, we must hope the financial stability oversight council can identify systemic risks before it is too late. We must hope that regulators will be emboldened to act in a timely manner when before, in the recent past, they failed to act. We must hope better transparency in financial data will produce early warning signals of systemic dangers so clear that a council and panel of judges will unhesitatingly agree. We must hope that capital requirements will be set properly in relation to risks that all too often remain purposefully hidden from view. We must hope that resolution authority will work, when we know it has no cross-border authority to resolve global financial institutions. Under the current bill, we must hope all future Presidents will appoint regulators as determined to carry out the same strict measures preached belatedly by today's regulators who have been converted by the traumatic experience of their own failures. All rules to restrict excessive risk taking in banking have a half life. That is because the financial sector is full of very smart people with an incentive to find their way around the rules, particularly to load up on risk, as this is what provides them their excessive profits and gigantic bonuses. I would rather not pin the future of the American economy on so much hope. I would rather Congress act now, definitively and responsibly, to end too big to fail. The changes in regulations envisioned today in the bill we are proposing would help initially, particularly until the next free market candidate who wins appoints regulators who only believe in self- regulation. This bill establishes hard lines. One of the greatest sayings is: Good fences make good neighbors. This builds the fences. Then we let the regulators do it, and we don't have to worry about the President picking the right regulators. Our bill would provide a legislative size and leverage restriction that would last far longer than the half life of who is appointed to be regulator. We want this to operate for a generation. In 1933, our forebears, after the Great Depression, made hard rules. They passed Glass-Steagall. They set up the FDIC. They set rules against margins, and they set the uptick rule. We should do no less. Remember, when they passed those bills in 1933, they helped us avoid a financial crisis for almost 50 years. Some argue we need massive banks, but recent studies show that with over $100 billion in assets--and by the way, these banks, as Senator Brown said, have over $2 trillion worth of assets--financial institutions no longer achieve additional economies of scale. They simply become dangerous concentrations of financial power that benefit from an implicit government guarantee that they will be saved if they fail. With this implicit guarantee, these firms will continue to have every incentive to use massive amounts of short-term debt to finance the purchase of risky assets. This bill would deal with their ability to be able to do that and would stop it. They would go on and be able to do this without us. They have done it in the past, and there is no reason to think they won't do it in the future until they cause the next crisis and taxpayers must bail them out again. While $100 billion banks would be smaller, they are not small banks. Such banks would have no trouble competing around the world. Under this bill, we would still have banks far bigger than even that size. People say: Look at other countries. Look what they are doing. Just because other countries subsidize megabanks banks that could send those countries spiraling into a financial crisis should not make us want to do the same. Everyone agrees--as the Senator from Arizona said--the most important thing is too big to fail. How much can we risk that by doing what other countries are doing, when they are creating banks that are clearly too big to fail? Most people in the oil industry did well under the breakup of Standard Oil, including its shareholders, and the breakup of AT&T helped the telecom industry become more dynamic, competitive, and profitable. The current Senate bill contains many important provisions that address the causes of the financial crisis, but why risk leaving oversized institutions in place when they potentially are too big to fail? Instead, we should meet the challenge of the moment and have the courage to act, as in this bill, to limit the size and practices of these literally colossal financial institutions, the stability of which are a threat to our economy. This bill is the best hope to ensure future decades of financial stability and the livelihoods of the American people. This bill will put the days of too big to fail forever behind us.

Mr. KAUFMAN. Lapdogs is another way of saying people who believe self-regulation will work. Alan Greenspan also was quoted as saying we should breakup the banks; Standard Oil wasn't bad. At the time he said, after it was over, a year later he gave a speech and said: I really thought self-regulation would work. I am dismayed that it didn't. The way I put it, it is as if there were a whole group of folks, not just in the financial regulatory area but all over the government, who basically believed the markets are great. I am a big believer in markets, but I also like football. The idea that someone would say: Football is great, but those referees keep blowing their damn whistles. Let's get the referees off the field so football players can be football players. We know what would happen if we pulled all the referees off the field in a game. I wouldn't want to be in the second pileup. That is what we said with this. We said we are going to pull the referees off the field and see what happens. These were good people. They just didn't believe they had to regulate, and we are now seeing the results. People say to us, when we propose these things--I have had several press people say to me--why don't we leave it up to the regulators? They can set these numbers. We shouldn't set these numbers. Let me read from a couple things. The 1970 Bank Holding Company Act amendments gave the Fed the power to terminate a company's authority to engage in nonbanking activities, basically doing what we are talking about doing, if it finds such action is necessary to prevent undue concentration of resources--I wonder if that went on recently-- decreased or unfair competition, conflicts of interest, or unsound banking practices. The Fed had the power to do this. They did not do it. The Financial Institutions Reform Recovery Enforcement Act also gave regulators the power to restrict an institution's growth and limit its size. What we are talking about now is giving the regulators essentially what they already have in the present bill. What Senator Brown and I are saying--and the other cosponsors--is, the buck stops here. We should tell the regulators what these percentages are going to be. Because if we leave it up to the regulators, as Senator Brown said, these are very powerful people and very powerful institutions. They hire the very best people to come and make their arguments. So if you are sitting there running a regulatory agency and you are saying: Oh my God, I don't want to do this, I don't want to shrink these things down--and remember one other thing too. As bad as things were in this latest crisis, think about what has happened during this crisis. They have all exploded. What did we have happen? JPMorgan Chase now includes Washington Mutual, a $400 billion bank. Bank of America now includes Merrill Lynch. We can go on from there. Wells Fargo now has Wachovia. These things were big. We had this mess. We deregulated. We put the regulators in. We changed laws. Now they are bigger. As the Senator says, their assets are 63 percent of the gross domestic product of this country. Fifteen years ago, they were 17 percent of gross domestic product. What do we have to do before someone sends the message that these things are too big and that this Congress not pass the buck to the regulators, who did not do the job in the past? Let me just say this. I think the world of our regulators now. I do not think there are people in regulating now who basically believe they should not be regulated. In 1933, we made a decision that helped us through three generations. What are we doing as Senators on the floor passing legislation based on the fact: I trust my regulators now. Why are we not passing legislation that will work over the next two or three generations--something that will work whether we get a President who believes in the fact that we should have a market or not, whether we have a good regulator or a bad regulator? Why shouldn't the Senate of the United States do its job and basically lay out restrictions of the kind that are in this bill so the regulators have them? Then they can enforce it. They can do the enforcement, which is their job. We should send a clear message to people that this is what we have to do.

Mr. KAUFMAN. We just have to give the regulators the tools they need to do their job, and the guidelines because we know what these guidelines are. These are not really terribly strict guidelines; they are just to have the ability to stop what is going on now, to get banks back to the size where they can be managed. As Senator Brown said, these banks have a competitive advantage because when they are too big to fail, not only do we have to worry about bailing them out, but all their interest rate charges are lower. We know that. The interest rate charges on CDs with these major banks-- they get higher interest rates than the other banks, and it is unfair competition for all the other small banks around this country. As I said in the beginning, this is a very simple proposition: Is the Senate going to do its job to make sure we have in place the ability to keep these banks from being too big to fail and preparing so we never have to get to the resolution authority?

Mr. KAUFMAN. By the way, let me say one thing about that. I am not for overregulation. But can you imagine, if we have another problem, what the regulation would be like then? Do you know what the proposals would be on this floor if, in fact, we have another problem? It would be draconian. It is important for all of us. We all care about our capital markets. One of the things that drive this country and make us great is the capital markets. We want them to be credible and we want them to be fair and we want them to work. So we want to make sure we do not get faced with this. I think that is exactly what Senator Brown and I are trying to do. We are trying to do a little bit of prevention here so we never get to that end of the road where we have to get involved in resolution authority.

Mr. KAUFMAN. Right.