Edward Kaufman

Mr. KAUFMAN

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 I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KAUFMAN

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 Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. KAUFMAN. Madam President, I ask unanimous consent to speak as in morning business for up to 6 minutes.

Mr. KAUFMAN

Mr. KAUFMAN. Madam President, I rise today to speak once more about our Nation's great Federal employees. Forty-nine years ago, President Kennedy stood before Congress and offered a bold profession of his faith in American innovation. Convening a special joint session to share with the American people his plans for economic recovery and global leadership, President Kennedy challenged us to reach the Moon in 9 years. He reminded us that leading the way in exploring space was central to leading a vibrant innovation economy, and that the causes of economic recovery and national security would benefit from investing in a Moon shot, and that the newly free around the world, caught between East and West, would draw inspiration from such a difficult mission undertaken by a free people. He challenged us to reach the Moon in 9 years. We made it there in 8 years. Kennedy's call echoed a timeless adage: ``Ad Astra Per Aspera''--to the stars through rough times. When we are faced with difficult challenges, we look for inspiration beyond the bounds of our farthest frontier. We can choose, despite uncertainty, to be forward looking and set lofty goals. That, more than anything, is the mission of those great Federal employees who work at the National Aeronautic and Space Administration, NASA. I was among those called to the study of engineering in the late 1950s during the years of Sputnik and the start of the space station. We benefited not only from the amount of investment the government was making in STEM fields, but also by the strong sense of purpose the space program inspired in all of us. America's reach into space is intricately linked with our need to train the next generation of scientists, engineers, technologists, and mathematicians who will drive our 21st century innovation economy, and I know there is no one in the Senate any more committed to STEM education than the Presiding Officer. That is why I have chosen this week to honor a great Federal employee from NASA who spent the last 2 weeks orbiting the Earth on STS-131 and has dedicated her career to promoting STEM education. Dorothy Metcalf-Lindenburger is one of NASA's new educator astronauts. A native of Fort Collins, CO, Dottie, as she is called, took an unusual path to space. As a child, Dottie was always fascinated with astronomy and space exploration. When she narrowly lost a contest to win a free trip to space camp, her parents saved up enough money for her to go. It turned out to be an excellent investment not only in their daughter's future, but also in the many students Dottie has inspired. Dottie pursued her love of science at Whitman College, where she majored in geology. She began teaching Earth science and astronomy at Hudson's Bay High School in Vancouver, WA, in 1999. In her 5 years there as a science teacher, she won awards for achievement. An avid marathon runner, Dottie also coached the school's cross-country team. In 2003, one of her students asked a question that would change her life. The student curiously asked: How do astronauts use the bathroom in space? When Dottie went on line to research the answer for her student, she discovered on NASA's Web site a recruitment call for teachers to join the space program. She jumped at the chance, though it was a long shot. Over 8,000 teachers applied. Dottie was one of three who made it and is currently NASA's youngest active astronaut. She joined NASA in 2004 and began the rigorous, 2-year Astronaut Candidate Training. Dottie learned how to fly jets and operate complex space shuttle and International Space Station systems. She undertook scientific and technical briefings, engaged in physiological training, and practiced water and wilderness survival skills. As an educator astronaut, Dottie works with NASA's education program, helping to develop new ways to bring space and STEM subjects into the classroom and inspiring girls and boys alike to follow in her footsteps by studying science. When she is not training to be a mission specialist on the shuttle, running a marathon, or singing lead vocals for an astronaut band, Dottie is also inspiring her own daughter. She and her husband Jason, who is a history teacher, have taught their 3-year-old daughter, Cambria, how to sing ``Twinkle, Twinkle, Little Star'' and other songs about the Sun and the Moon. On April 5, Dottie and the rest of the crew of Discovery's STS-131 mission lifted off from Cape Canaveral for a 2-week trip to the International Space Station. Dottie's primary tasks were overseeing the transition of the station's computers to a new Ethernet network and orchestrating the space walks conducted by two of her colleagues. She also recorded a video to help promote robotics, science, and engineering. Dottie sees her role as a teacher for all, helping to make science exciting for adults and children alike. She and her husband even built a telescope that they brought on summer vacation, and wherever they stopped they would encourage people to look through it at objects like Jupiter or the Moon. She said, ``Wherever we go out in our solar system, from a teaching standpoint, I really hope that students are engaged in learning math and science. We should always try to be a leader in this.'' America's astronauts--like Dottie--carry out important work with far- reaching impact. Once again we find ourselves as a nation in difficult times, just as we were when President Kennedy challenged us to look skyward. Just last week, President Obama laid out his vision for the future of American space exploration. No matter what their next mission, it will be carried out by NASA employees. The outstanding public servants at NASA give flight to our dreams and remind us that, in America, when we will it, there is no impediment to grand achievement. ``Ad Astra Per Aspera.'' Let us look once more, in these rough times, to the stars--to the limits of space and those who would take us there. Let us recommit ourselves to inspiring students, just as astronauts like Dottie do each day, to study science, math, engineering, and technology in pursuit of innovation in space and here on Earth. I hope my colleagues will join me in thanking Dorothy Metcalf- Lindenburger and her crewmates from STS-131 for their hard work and contribution. We welcome them home. They are all truly great Federal employees. I yield the floor and suggest the absence of a quorum.

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

Mr. KAUFMAN. Madam President, I ask unanimous consent that the time during the quorum call be divided equally between the two sides.

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

Mr. KAUFMAN

Mr. KAUFMAN. Madam President, I thank the Senator from North Dakota. Madam President, I ask unanimous consent that on Wednesday, April 21, following a period of morning business, the Senate proceed to executive session to consider Executive Calendar No. 699, the nomination of Christopher Schroeder to be an Assistant Attorney General; that there be 3 hours of debate with respect to the nomination; that upon the use or yielding back of time, the Senate proceed to vote on confirmation of the nomination; that upon confirmation, the motion to reconsider be considered made and laid upon the table; further, that the cloture motion with respect to the nomination be withdrawn; provided that upon disposition of the Schroeder nomination, the Senate then proceed to Executive Calendar No. 578, the nomination of Thomas Vanaskie to be a U.S. circuit judge for the Third Circuit; that there be 3 hours of debate with respect to the nomination; that upon the use or yielding back of time, the Senate proceed to vote on confirmation of the nomination; that upon confirmation, the motion to reconsider be considered made and laid upon the table; that the cloture motion with respect to the nomination be withdrawn; provided further that on Thursday, April 22, following a period of morning business, the Senate proceed to executive session to consider Executive Calendar No. 607, the nomination of Denny Chin to be a U.S. circuit judge for the Second Circuit; that there be 60 minutes for debate with respect to the nomination; that upon the use or yielding back of time, the Senate proceed to vote on confirmation of the nomination; that upon confirmation, the motion to reconsider be considered made and laid upon the table; with the cloture motion withdrawn, and the President be immediately notified of the Senate's action with respect to the above- referenced nominations; with all time covered under this agreement equally divided and controlled between Senators Leahy and Sessions or their designees; finally, the Senate then resume legislative session.

Mr. KAUFMAN. Madam President, I yield to the Senator from North Dakota.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Committee on Armed Services be authorized to meet during the session of the Senate on April 20, 2010, at 9:30 a.m.

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Committee on Energy and Natural Resources be authorized to meet during the session of the Senate to conduct a hearing on April 20, 2010, at 10 a.m., in room SD-366 of the Dirksen Senate Office Building.

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Committee on Finance be authorized to meet during the session of the Senate on April 20, 2010, at 10 a.m., in room 215 of the Dirksen Senate Office Building, to conduct a hearing entitled ``The President's Proposed Fee on Financial Institutions Regarding TARP: Part 1''.

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Committee on Health, Education, Labor, and Pensions be authorized to meet, during the session of the Senate to conduct a hearing entitled ``Protection from Unjustified Premiums'' on April 20, 2010. The hearing will commence at 9:30 a.m. in room 430 of the Dirksen Senate Office Building.

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Committee on the Judiciary be authorized to meet during the session of the Senate, on April 20, 2010, at 10 a.m., in room SD-226 of the Dirksen Senate Office Building, to conduct a hearing entitled ``Oversight of the U.S. Department of Justice, Civil Rights Division.''

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Committee on Homeland Security and Governmental Affairs be authorized to meet during the session of the Senate on April 20, 2010, at 11 a.m. to conduct a hearing entitled ``Border Security: Moving Beyond the Virtual Fence.''

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Committee on Homeland Security and Governmental Affairs be authorized to meet during the session of the Senate on April 20, 2010, at 2 p.m.

Mr. KAUFMAN. Mr. President, I ask unanimous consent that the Select Committee on Intelligence be authorized to meet during the session of the Senate on April 20, 2010, at 2:30 p.m.

Mr. KAUFMAN

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

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

Mr. KAUFMAN

Mr. KAUFMAN. Madam President, as we continue to learn more facts from various investigations into the 2008 financial meltdown, a certain picture is becoming increasingly clear. Like a jigsaw puzzle slowly taking shape, we can begin to see the outlines of many of the causes of the crisis--and the solutions they demand. In my view, it is a picture of Wall Street banks and institutions that have grown too large and complex and that suffer from irreconcilable conflicts between the services they provide for their customers and the transactions they engage in for themselves. It is also a picture of management that either knew about the lack of financial controls and outright fraud at the very core of these institutions or was grossly incompetent because it did not. And the picture includes regulators who failed miserably as well, due to malfeasance or incompetence or some combination of both. Until Congress breaks these gigantic institutions into manageably sized banks and draws hard, clear lines for regulators to ensure that effective controls remain in place, we will have done neither that which is necessary to restore the rule of law on Wall Street nor that which will ensure that another financial crisis does not soon happen again. What have we learned in just the past 5 weeks? On March 15, I came to the Senate floor to discuss the bankruptcy examiner's report on Lehman Brothers and said, as many of us have suspected all along, that there was fraud--fraud--at the heart of the financial crisis. The examiner's report exposed the so-called Repo 105 transactions and what appears to have been outright fraud by Lehman Brothers, its management, and its accounting firm, which all conspired to hide $50 billion in liabilities at quarter's end to ``window dress'' its balance sheet and mislead investors. And this practice does not appear to be unique to Lehman Brothers. I went further and noted that questions were being raised in Europe about whether Goldman Sachs had an improper conflict of interest when it underwrote billions of Euros in bonds for Greece. The questions being raised include whether some of these bond-offering documents disclosed the true nature of these swaps to investors and, if not, whether the failure to do so was material. Last week, we learned about more alleged fraud at the heart of the financial crisis. On Friday, the Securities and Exchange Commission filed charges against Goldman Sachs and one of its traders for alleged fraud in the structuring and marketing of collateralized debt obligations tied to subprime mortgages. Goldman allegedly defrauded investors by failing to disclose conflicts of interest in the design and structure of these collateralized debt obligations. The SEC says this alleged fraud cost investors more than $1 billion. While I will not prejudge the merits of the case, the SEC's complaint alleges that Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and that the hedge fund had taken a short position against the CDO. Robert Khuzami, Director of the SEC Division of Enforcement, said: Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party. Kenneth Lench, chief of the SEC's Structured and New Products Unit, added: The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress. Goldman Sachs has denied any wrongdoing and has said it will defend the transaction. This particular case involving Goldman Sachs was almost certainly not unique. Instead, it was emblematic of problems that occurred throughout the securitization market. Late last month, Bob Ivry and Jody Shenn of Bloomberg News wrote about the conflicts of interest present in the management of CDOs, a topic also discussed at length in Michael Lewis's book ``The Big Short.'' The SEC should pursue other instances of conflicts of interest in the CDO market that led to a failure to disclose material information. Last year, Senators Leahy, Grassley, and I, along with many others in the Congress, worked to pass the bipartisan Fraud Enforcement and Recovery Act so that our law enforcement officials would have additional resources to target and uncover any financial fraud that was a cause of the great financial crisis. However long it takes, whatever resources the SEC needs, Congress should continue to back the SEC and the Justice Department in their efforts to uncover and prosecute wrongdoing. I applaud SEC Chairman Mary Schapiro and especially Rob Khuzami and the team he has reshaped in the Enforcement Division. They deserve our steadfast support as the leadership of the SEC continues its historic mission of revitalizing that institution and making it clear to all on Wall Street that there is a new cop on the beat. Also last week, our colleague, chairman Carl Levin, ranking member Tom Coburn, and the staff of the Permanent Subcommittee on Investigations began a series of hearings on the causes of the financial crisis. It is a testament to the professionalism and dedication of Chairman Levin that he has brought the subcommittee's resources to bear in such an effective and thorough manner. I also commend ranking member Tom Coburn for his dedication and effort as a partner in this effort. Chairman Levin and the subcommittee staff deserve credit and our deep appreciation for the work they have put into this series of hearings on Wall Street and the financial crisis. Since November 2008, subcommittee investigators have gathered millions--millions--of pages of documents, conducted over 100 interviews and depositions, and consulted with dozens of experts. It is truly a mammoth undertaking, and the fruits of their labor were evident in last week's two hearings on Washington Mutual Bank. I look forward to the subcommittee's remaining two hearings on this subject, including this Friday's hearing on the role of the credit rating agencies. I commend this hearing to all my colleagues. The Levin hearings deserve comparison to the legendary Pecora investigations of the 1930s, which were held by the Senate Committee on Banking and Currency to investigate the causes of the Wall Street crash of 1929. The name refers to the fourth and final chief counsel for the investigation, Ferdinand Pecora, an assistant district attorney for New York County. As chief counsel, Pecora personally examined many high- profile witnesses who included some of the Nation's most influential bankers and stockbrokers. The investigation uncovered a wide range of abusive practices on the part of banks and bank affiliates. These included a variety of conflicts of interest, such as the underwriting of unsound securities in order to pay off bad bank loans as well as ``pool operations'' to support the price of bank stocks. The Pecora hearings galvanized broad public support for new banking and securities laws. As a result of the Pecora investigation's findings, the Congress passed the Glass-Steagall Banking Act of 1933 to separate commercial and investment banking; the Securities Act of 1933 to set penalties for filing false information about stock offerings; and the Securities Exchange Act of 1934, which formed the Securities and Exchange Commission, to regulate the stock exchanges. Thanks to the legacy of the Pecora Commission hearings and subsequent legislation, the American financial institution rested on a sound regulatory foundation for over half a century; that is, until we began the folly of dismantling it. The Levin hearings have shined a much needed spotlight on the role of potential outright fraud by financial actors as well as the incompetence and complicity of bank regulators in the financial crisis. There is no better example of the danger that fraud and lax regulation poses to our financial system than the collapse of Washington Mutual Bank, known as WaMu. Far too often, the failure of institutions such as Washington Mutual is blamed on high-risk business strategies. It kind of sounds all right, doesn't it? While such strategies are clearly part of the problem, they should not be used to mask other causes such as fraud and malfeasance which played a significant role in the collapse of WaMu. Evidence developed by the subcommittee demonstrates that WaMu officials tolerated, if not outright encouraged, fraud as a byproduct of promoting a dramatic expansion of loan volume. The most blatant example of WaMu's culture of fraud was its widespread use of what are called stated income loans. Stated income loans is a practice of lending qualified borrowers loans without independent verification of what they state their income is. Listen to this. This is unbelievable. Approximately 90 percent of WaMu's home equity loans, 73 percent of its option ARMs, and 50 percent of its subprime loans were stated income loans. You go to the bank, you walk in, they say: Ted, what is your income? You say what it is, and that is it. Based on that, you can get 90 percent of WaMu's home equity loans, 73 percent of its option ARMs, and 50 percent of its subprime loans-- stated income loans. As Treasury Department inspector general Eric Thorson said last week, WaMu's predominant mix of stated income loans created a ``target rich environment'' for fraud. Because WaMu made these stated income loans with the intent to resell them into the secondary market, there was less concern whether borrowers would ever be able to repay them. WaMu created a compensation system that rewarded employees with higher commissions for selling the very riskiest of loans. In 2005, WaMu adopted what it called its high- risk lending strategy because those loans were so profitable. In order to implement this strategy, it coached its sales branch to embrace ``the power of yes.'' The message was clear. As one industry analyst has said: ``If you were alive, they would give you a loan . . . if you were dead, they would give you a loan.'' That this culture led to fraud on a massive scale should have surprised no one. An internal review by one southern California loan officer revealed that 83 percent of loans contained instances of confirmed fraud. In another office, 58 percent of loans were considered to be fraudulent. What did WaMu management do when it became clear that fraud rates were rising as house prices began to fall? What did they do? Rather than curb its reckless business practices, it decided to try to sell a higher proportion of these risky, fraud-tainted mortgages into the secondary market, thereby locking in a profit for itself even as it spread further contagion into our capital markets. In order for WaMu and institutions similar to it to sell these low- quality loans to the secondary market, they need a AAA rating from credit rating agencies. So what did these institutions do? They gamed the system and manipulated the agencies by engaging in a practice called barbelling. Apparently, the credit rating agencies did not examine individual FICO scores when rating mortgage-backed securities and instead relied on average FICO scores. As revealed at the hearing by a WaMu risk officer and detailed in Michael Lewis's book ``The Big Short,'' lenders could create the requisite average score by pairing loans whose borrowers had relatively high scores with borrowers whose scores were far lower and would normally warrant a loan, which is the reason why it is called barbelling. So if the raters wanted an average FICO score of 615, a lender could compare scores of 680 with scores of 550, even though borrowers with scores of 550 were almost certain to default on the loan. This barbell effect satisfied the rating agencies, even though half the loans, in many cases, had little chance of success. At the hearing, WaMu's CEO, Kerry Killinger, effectively admitted to barbelling by saying ``I don't have the barbell numbers in front of me.'' To make matters worse, WaMu scored high FICO scores by seeking out borrowers with short credit histories. Such borrowers often have high FICO scores, even though they have not demonstrated the ability to take on and pay off large debts over time. These borrowers are called ``thin file'' borrowers. According to a report in the New York Times, WaMu encouraged thin file loans, even circulating a flier to sales agents that said ``a thin file is a good file.'' The book ``The Big Short'' even discusses a Mexican strawberry picker with an income of $14,000 and no English who was ostensibly given a $724,000 mortgage on the basis of his thin file. Plainly, the Office of Thrift Supervision failed miserably in its responsibility to regulate WaMu and to protect the public from the consequences of WaMu's excessive and unwarranted risk-taking, including the toleration of widespread fraud. Although WaMu comprised fully 25 percent of OTS's regulatory portfolio, OTS adopted a laissez faire regulatory attitude at WaMu. Although line bank examiners identified the high prevalence of fraud and weak internal controls at WaMu, OTS did virtually nothing to address the situation. In fact, OTS advocated for WaMu, among other regulators, and even actively thwarted an FDIC investigation into WaMu during 2007 and 2008. The complete abdication of regulatory responsibility by OTS may find sad explanation in the fact that OTS was dependent on WaMu's user fees for 12 to 15 percent of its budget. The regulatory failures at OTS were not unique. The overall regulatory environment at the time was extremely deferential to the market based on the widespread but faulty assumption that markets can and will effectively self-regulate. Self-regulate. At last Friday's hearing, the testimony of the inspector general at the Department of the Treasury was particularly noteworthy. He said bank regulators: . . . hesitate to take any action, whether it's because they get too close after so many years or they're just hesitant or maybe the amount of fees enter into it . . . I don't know. But whatever it is, this is not unique to WaMu and it is not unique to OTS. Let me repeat. It was the conclusion of our Treasury Department's inspector general that the failure of regulators to harness the lawless nature of conflicted institutions was not unique to Washington Mutual or to the Office of Thrift Supervision. I have said it before and I will say it again: It is time we return the rule of law to Wall Street, where it has been seriously eroded by the deregulatory mindset that captured our regulatory agencies over the past 30 years. We became enamored of the view that self-regulation was adequate, that enlightened self-interest would motivate counterparties to undertake stronger and better forms of due diligence than any regulator could perform, and that market fundamentalism would lead to the best outcomes for the most people. Some people even say that today. They say transparency and vigorous oversight by outside accountants is supposed to help our financial system--keep our financial system credible and sound. The allure of deregulation led us instead to the biggest financial crisis since 1929 and to former Federal Reserve Chairman Alan Greenspan's frank admission that he was ``deeply dismayed'' that the premise of enlightened self-interest had failed to work. Now we are learning, not surprisingly, that fraud and lawlessness were key ingredients in the collapse as well. As we turn to financial regulatory reform, we must remember that effective regulation requires not only motivated and competent regulators but also clear lines drawn by Congress. Based on what we have learned, what must we do? First, we must undo the damage done by decades of deregulation. That damage includes financial institutions that are too big to manage and too big to regulate--as former FDIC Chairman Bill Isaac has called them: too big to manage, too big to regulate. It also includes a Wild West attitude on Wall Street, in which conflict of interests are rampant and lead to fraudulent behavior as well as colossal failures by accountants and lawyers who misunderstand or disregard their role as gatekeepers. The rule of law depends, in part, on having manageably sized institutions, participants interested in following the law, and gatekeepers motivated by more than a paycheck from their clients. That is why I believe we must separate commercial banking from investment banking activities, restoring a modern version of the Glass- Steagall Act to end the conflicts of interest at the heart of the financial speculation undertaken by mega banks that are too big to fail. We further should limit the size of bank and nonbank institutions, something Senator Sherrod Brown and I proposed in legislation we intend to introduce this Wednesday. Otherwise, we will continue to bear these mega banks' claims that they are merely market makers and no one who deals with them should trust whether the very creator of a financial product they sell is secretly betting against its success. Second, we must help regulators and other gatekeepers not only by demanding transparency but also by providing clear, enforceable rules of the road wherever possible. One clear lesson of the Goldman allegations is, we need greater transparency and disclosure of counterparty positions in the over-the-counter derivatives market. We should mandate that derivatives are traded on an exchange or at least essentially cleared. The rare exemption should carry with it a reporting requirement so that all counterparties understand the positions being taken by other clients of the dealer firm. Clearly, we need to fix a broken securitization market. No market, regardless of how sophisticated its participants, can function without proper transparency and disclosure. While I am pleased that the current reform bill would direct the SEC to issue rules requiring greater disclosure regarding the underlying loans in an asset-backed security, I believe we must go further still. Requirements for disclosure should not merely begin and end at issuance. Instead, disclosure should be automated, standardized, and updated on a timely basis. This will provide investors with relevant information on the performance of the loans, their compliance with relevant laws--fraudulent origination, for example, is generally uncovered after the fact--and the replacement of new collateral. This information should empower investors and countervail the malfeasance of issuers looking to adversely select dodgy collateral that they are also shorting on the side. Moreover, such real-time monitoring by investors would also have beneficial effects further up the securitization supply chain. If originators know they can't get away with selling fraudulent or poorly underwritten loans, they will also be forced to improve their standards. While not a silver bullet, I am also generally supportive of requirements that those who originate and securitize loans retain risk by keeping some percentage on their very own balance sheets. WaMu, for example, developed, in Senator Levin's words, a ``conveyor belt'' that originated, packaged, and dumped toxic mortgage products downstream to unsuspecting investors. Their lack of ``skin in the game'' allowed them to make a mockery of the originate-to-distribute model. While Bear Stearns, Lehman Brothers, and other firms faltered due to their excessive retention of risk, this basic requirement will better align the interests of originators and securitizers with those of investors. Moreover, a clear lesson of the Levin hearings is that Congress must ban the widespread issuance of stated income loans. I understand Senator Levin is developing further reform proposals based on his conclusions from the hearings. Third, we must concentrate law enforcement and regulatory resources on restoring the rule of law to Wall Street. We must treat financial crimes with the same gravity as other crimes because the price of inaction and a failure to deter future misconduct is enormous. That is why I'm pleased the SEC is turning the page on its recent history and sending a message throughout Wall Street: fraud will not pay. Madam President, last week's revelations about Washington Mutual and Goldman Sachs reinforce what I've been saying for some time. Deregulation was based on the view that rational actors would operate in their own self-interest within a framework of law. But even with the most rigorous regulators, it is impossible to trace the financial self- interest of convoluted financial conglomerates, much less constrict their behavior before it runs afoul of the law. WaMu made loans they knew could not be paid back. Goldman Sachs allegedly permitted clients to take secret positions against the very financial products that it had created. The picture being revealed by the jigsaw puzzle of multiple investigations is now emerging clearly in my eyes. These financial institutions are too big and conflicted to manage, too big and conflicted to regulate, and too big to fail. Even Alan Greenspan has said about our current predicament: ``If they're too big to fail, they're too big.'' Our country took a giant step backwards during the last financial crisis, upending the dream of home ownership for millions of Americans, and throwing millions of people out of work as well. The credibility of our markets, one of the pillars of our economic success, was badly damaged. It must be restored. There must be structural and substantive change to Wall Street, where bankers must resume their central role of efficiently allocating capital, not taking bets in opaque markets that no one can understand. The solution is clear. We must split up our largest financial institutions into more manageable entities; we must separate their component parts so they are no longer inherently conflicted and so they can be properly regulated. Only then, if necessary, can they be allowed to fail without sending our entire economy to the precipice of disaster. I yield the floor and suggest the absence of a quorum.

Mr. KAUFMAN

Mr. KAUFMAN. Madam President, I rise once again to speak about one of our Nation's great Federal employees. We have just returned to Washington, and I know we have a long and busy work period ahead in the Senate. All of us will be relying on our staff--especially our schedulers and personal assistants--to keep us abreast of the latest vote schedules and meetings with constituents and colleagues. I cannot overstate how much those of us in positions of leadership depend on the hard work and expertise of those who keep us organized and ever-prepared. This is not just true for me and my colleagues in the Senate but also for Members of the House, Cabinet Secretaries, agency heads, and other senior officials. That is why I have chosen to honor as this week's great Federal employee a woman whose long career did so much to help keep our Nation safe during the Cold War. Thelma Stubbs Smith served for over 40 years in the Defense Department as a personal assistant. She worked for seven consecutive Secretaries of Defense--both Republican and Democratic. Before that, Thelma served under six Assistant Secretaries in the Department. A native of Chicago, Thelma began her public service career during World War II, when she worked for the Selective Service System and the Office of Price Administration. After the war, she worked as a secretary at the Veterans Administration before coming to Washington to work for the Pentagon's Guided Missiles Committee. Thelma briefly served on the staff of Illinois Congressman Melvin Price in 1952, but she soon returned to the Pentagon. In the 1950s and 1960s, Thelma served as the personal assistant to six Assistant Secretaries of Defense, including William Bundy, John McNaughton, and Paul Nitze. During this time, she began accompanying them on what would later total 85 trips overseas during her career. As part of her duties during that period, she worked closely with Secretary Robert McNamara. One of the most harrowing moments in her life came on the 13th day of the Cuban Missile Crisis. Thelma spent that evening personally burning important cables and notes in a small office at the Pentagon, as they were too sensitive to be shredded with other papers. When she finally left after midnight, she was one of the few Americans who knew just how precarious the situation was, and she could not say with certainty whether the Pentagon would be there the next morning. But, thankfully, that morning came. In 1969, when Melvin Laird was confirmed as Secretary of Defense, he asked Thelma to serve as his personal assistant. She agreed to do so on a temporary basis. I know personally how a ``temporary basis'' can evolve into a life's pursuit. When Joe Biden asked me to help him set up his Senate office in 1972, I took a 1-year leave of absence from my job with the DuPont Company, and I ended up staying with Joe Biden for 22 years. In that way, Thelma began her service as the personal assistant to every Secretary of Defense from Melvin Laird to Frank Carlucci. During the course of her service, Thelma visited every corner of the world. She was awarded 10 Meritorious Civilian Service Medals and the Secretary of Defense Medal for Distinguished Public Service, which is the highest medal a civilian employee of the Pentagon can earn. A paragon of professionalism and discretion, Thelma always answered those who urged her to write a book by saying that ``It would be 500 blank pages, and the title would be `My Lips are Sealed.' '' All of us who serve in positions of leadership with enormous responsibility to the American people owe so much to great organizers and assistants like Thelma. I know firsthand how Thelma's dedication to public service was passed on to her family. Her daughter, Sheryl Rogers, and son-in-law, Geoff Rogers, have lived in my home State of Delaware for over 20 years, and both were Federal employees as staffers here in the Senate. Sheryl used to work in the office of former Virginia Senator John Warner, and Geoff spent a few years in then-Senator Joe Biden's office, back when I was chief of staff. Thelma, now retired, resides in Northern Virginia, not far from the Pentagon, where she served for so many years. I hope my colleagues will join me in honoring the great contribution Thelma Stubbs Smith has made to our Nation as well as thanking all those who serve as personal assistants in the Defense Department and across our government. They are all truly great Federal employees. I yield the floor, and I suggest the absence of a quorum.

Mr. KAUFMAN

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

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I have come to the floor several times now to discuss the problem of too big to fail, which I believe is the most critical issue to be addressed in any financial reform bill. Financial institutions that are too big to fail are so large, so complex, and so interconnected that they cannot be allowed to fail nor follow the normal corporate bankruptcy process because of the dire threat that would pose to the entire financial system. The largest six bank holding companies--Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley--are certainly too big to fail. The term may also cover a larger set of institutions. After all, last year's most vaunted stress tests of the largest bank holding companies covered 19 institutions, and even that exercise did not include many other systemically significant nonbank financial institutions, including Fannie Mae and Freddie Mac, insurance companies, derivatives clearinghouses, and hedge funds. While many in government and industry want to eliminate the term ``too big to fail,'' the fact is these too-big-to-fail financial institutions are bigger, more powerful, and more interconnected now than ever before. Only 15 years ago, the six largest U.S. banks had assets equal to 17 percent of overall gross domestic product. The six largest U.S. banks now have total assets estimated in excess of 63 percent of gross domestic product. That goes from 17 percent of GDP just 15 years ago to 63 percent of GDP now. While some still argue there are benefits to having very large financial conglomerates--and I am sure there are--virtually everyone agrees the problem of too big to fail needs to be address. The disagreement is how this be done. I was interested to hear Senator McConnell on the Senate floor yesterday say we must never use taxpayer money again to bail out too- big-to-fail institutions. But no one wants to do that. No one is thinking about that. No one is planning to do that. The question is, What is the solution to prevent these institutions from failing in the first place? The other party has put forward no solution, and doing nothing is by far the worst solution of all. The minority leader came to the floor today and said the bill before the Senate is good for Wall Street and bad for Main Street. That is simply an astounding statement to make. Main Street wants Congress to act. Main Street wants Congress to ensure that Wall Street never engages in reckless behavior again. Yet what does the minority leader offer? Despite the experience of Lehman Brothers, the minority leader apparently believes we should do nothing and simply stand back in the future and let these megabanks fail when they take risks that go wrong. The minority leader said yesterday: The way to solve this problem is to let the people who made the mistakes pay for them. We won't solve this problem until the biggest banks are allowed to fail. Astounding. His answer is, the resolution of too-big-to-fail banks needs to be dealt with through the bankruptcy process. In my view, that approach is dangerous and irresponsible. If we do nothing and wait for another crisis, future Presidents-- whether Republican or Democratic--will face the same choices as President Bush: Whether to let spiraling, interconnected, too-big-to- fail institutions, such as AIG, Citigroup, and others, collapse in a contagion, sending the economy into a depression or step in ahead of bankruptcy and save them with taxpayer money. If that happens, the choice of allowing bankruptcy will mean tremendous economic pain on Main Street America. So some Congress in the future will similarly be faced with another TARP-like decision, which in the fall of 2008 many in both parties believed they had no choice but to support, including the minority leader. Relying on bankruptcy law is not the answer. The approach by many conservatives and those on the other side of the aisle is to simply let them fail and let U.S. bankruptcy law--where shareholders get wiped out and creditors take a haircut--reimpose the discipline in the financial system that was lacking in the runup to the crisis. For example, Peter Wallison and David Skeel have argued in the Wall Street Journal: The real choice before the Senate is between the FDIC and the bankruptcy courts. It should be no contest, because bankruptcy courts do have the experience and expertise to handle a large-scale financial failure. This was demonstrated most recently by the Lehman Brothers bankruptcy. If bankruptcy was a cure in Lehman Brothers, it was one that almost killed the patient. When former Treasury Secretary Hank Paulson decided to let Lehman Brothers go into bankruptcy, our global credit markets froze and creditors and counterparties panicked and headed for the hills. Instead of imposing market discipline, it only prompted more bailouts and almost brought down the entire financial system. It ultimately took 18 months to close out the case on Lehman Brothers, an eternity for financial institutions that mark to market and fund their balance sheets on an interday basis. Bankruptcy is an even more unattractive option when one considers that Lehman was an investment bank, while today's megabanks operate under the bank holding company umbrella. It is virtually impossible to have an integrated resolution of a large and complex bank holding company. The bank subsidiary would go into FDIC resolution, the insurance affiliates would go into State liquidation procedures, the securities affiliate would go into chapter 7, while other affiliates and overall holding companies would go into chapter 11. A plan this unwieldy is no plan at all. In fact, the only way to truly eliminate the problem with too-big-to-fail banks is for Congress to act. It is true that I believe we should go further than the current bill. I would break these big banks apart, thus limiting their size and leverage. Given the consequences of failing to do enough to prevent another financial crisis, the safest thing to do today is for Congress to put an end to too big to fail. If you believe these megabanks are too big, if you reject the choice of bankruptcy that will lead to a recession or depression, then breaking them up is the logical answer. That is the only way that greatly diminishes the future probability of another financial disaster. The Great Depression of the 1930s must be avoided at all cost. Two years ago, permitting Lehman Brothers to enter bankruptcy brought about the Great Recession, the most painful economic downturn this country has seen since the Great Depression. If we were to let other institutions fall into bankruptcy, adopting the minority leader's approach, the horrors our economy would have faced would make the realities of the past 2 years pale in comparison. I certainly don't want to rely on bankruptcy to break the boom-bust- bailout cycle. I believe Congress should break the cycle today. We should not follow an abdication of regulatory responsibility with an abdication of democratic government. As representatives of the people most hurt by the financial crisis, Congress should act decisively to ensure that we benefit again from decades of financial stability, not do nothing, which most assuredly would leave us to live on the precipice of financial disaster, as the minority leader would have us do. We need a full and straightforward debate in the Senate about what Congress must do. In my view, the mere existence of too-big-to-fail institutions perpetuates a long cycle of boom, bust, bailout. Instead of hopelessly trying to impose order and discipline in a chaotic crisis, we need to clearly, decisively, and preemptively deal with the problem of too big to fail now. As Senator Levin pointed out this week, when he kicked off the Permanent Subcommittee's hearings on its investigation of the financial crisis, there are many eerie parallels between this crisis and the one in the late 1920s and early 1930s. In both cases, bankers were derelict in their duties, while drawn to disruptive and excessive speculation, fueled in part by their compensation arrangements. Does that sound familiar? Bankers were derelict in their duties, while drawn to disruptive and excessive speculation, fueled in part by their compensation arrangements. In the 1930s, in response to these problems, we built an enduring regulatory framework that put our entire financial system on stable footing for decades. We simply cannot afford another financial meltdown. The choice is clear. But it is also clear that the worst thing we can do is to take the dangerous risk of doing nothing. To me, the choice that is best for the American people is clear. I yield the floor.

Mr. KAUFMAN

Mr. KAUFMAN. Mr. President, I ask unanimous consent to extend morning business.

Mr. KAUFMAN

Mr. KAUFMAN. Madam President, some things have changed. I came here in 1973 working for now-Vice President Biden. Back then, if you asked the American people what they most disliked about Washington, they would say partisan bickering, the back-and-forth. That is what they really do not like about what goes on. My basic reaction is, and I have said to people that today what looks like a lot of partisanship--basically, Senators like each other. This is not about people not liking each other. There is not a Senator on the Republican side of the aisle whom I do not have a positive relationship with and feel good about. You can say that about the issues. What I say is there is a difference on the issues. Basically, we disagree about the issues. But I do have a hard time, when it comes to judicial nominations especially, on the rationale for the argument because it is not a matter of issues. We have differences about some judges, but the vast majority of judges still being held are judges we all agree are competent judges. So why is it they are not being confirmed, especially when we talk about the two areas about which most Americans are so concerned? One is crime, that we deal with crime and deal with it in a quick manner; that people are given a fair trial, but then if they are guilty, they are put in jail. All Americans agree to that. To do that, one of the key chokepoints for us is the judges. We need the judges to be confirmed in order to deal with crime. The other area, as I know my friend from Virginia is so aware, is the business side. If you are a businessperson, you need certainty. You need the ability to know, if you have a dispute, that you can get it handled in a court and that you get prompt action. That is what everyone wants. With many of these things, it isn't as important that you win as it is that you get an answer. When we have vacancies in district and circuit courts, that holds up everything. The final point is, there were always differences of opinion, but starting about the 1980s, the judges became a football. They just became a football. When I hear about the old wars--it is like the Hatfields and McCoys. Who was the first Senator to hold up the most number of judges and when did it happen? Our judge did this. You did this. We did that. It really sounds like the Hatfields and McCoys on the floor sometimes. I am saying it is time to put that behind us. It is time to put that behind us, especially when it comes to these judges whom we know are competent; where there is agreement, there is no disagreement. I defend the right of the minority to hold up judges they think are not competent. We had three judges in a row who were confirmed by unanimous votes of the Senate. What I am saying is it is time to put that behind us. The American people are looking to us to behave in a bipartisan manner. Again, we are going to have partisan differences on some judges, but when we have judges where there is bipartisan agreement, the American people are stymied to understand why in Washington we are behaving this way. I call on my colleagues to work together and see if we cannot get these judges confirmed. I thank the distinguished Senator.