Jeff Merkley

Mr. MERKLEY

Mr. MERKLEY. The gentleman is correct that we would expect the Federal Reserve Board, and, in time, the bureau, to exempt any mortgage insurance premiums that are required to be paid after closing that might otherwise be covered, consistent with the exemption authority under paragraph (7)(A). Post-closing mortgage insurance premiums are distinct from points and fees charged at the time the loan is obtained, and those post-closing premiums are not contemplated to be covered under this section.

Mr. MERKLEY. Mr. President, the points made by my colleagues from Maine and Connecticut are correct. The purpose of the amendment is to ensure that consumers are sold loans that they are able to repay. The authority granted to the agency to prescribe rules establishing other criteria--and to ``revise, add to, or subtract from'' the existing criteria--relating to the presumption of compliance is intended to allow the agency to craft criteria that would permit lenders who extend low-dollar loans to meet the presumption of compliance, while promoting fair pricing and sustainable lending. This is particularly important in rural areas and other areas where home values are lower. Mr. President, the gentleman is also correct in regard to streamline refinancing under rules of the FHA, the VA, and other government agencies. It is intended that the Federal Reserve Board, or the bureau, will exempt such loans under the exemption authority of paragraph (7)(A).

Mr. MERKLEY. Mr. President, we are coming to the end of a long path of consideration of fundamental financial reforms. A key piece of the discussion along that trail has been whether we are going to modify the way securities operate, how high-risk investment pools operate, and how ordinary banking that takes deposits and makes loans operate, so that all three will do better in their role of aggregating capital and allocating capital. We have some fundamental challenges in our society. One is that inside of a bank holding company, we have both the high-risk investing and the standard process of taking deposits and making loans. These two are both excellent systems, but they don't belong under the same roof. When they are under the same roof, they create two problems. The first problem is the bank that is providing the loans has access to a discount window in insured deposits. All of that is intended to make sure money gets to small businesses and families. But when they are under the same roof, we have the temptation of the resources being directed to high-risk investing rather than getting into the hands of our families and small businesses. In every corner of Oregon and in every corner of every State, folks are finding it hard to get loans. Lines of credit are being cut in half. Projects to expand and hire additional employees are being thwarted because the local bank says: We can't do any more lending because we have hit our limit on leverage and our capital is such-and- such. We do not want large banks that have both functions to be diverting their energy and resources from the lending that is so important to Main Street into high-risk investing. They need to be separate for that reason. The second reason is that when the investing blows up, as it does periodically, then we have a situation where it blows up the lending, sends shock waves through lending. It causes lending to freeze. When that happens, the economy suffers, Main Street suffers, and families suffer. That is where we are right now. Let's take a look at the facts. We have a situation where over the past couple years we have seen Lehman Brothers, which had high-risk trading losses of over $30 billion, go down. Merrill Lynch had $20 billion of loss, saved by TARP; Morgan Stanley, $10 billion, saved by TARP; JPMorgan Chase, $25 billion from TARP; Goldman Sachs, $10 billion from TARP; Bank of America, over $45 billion in TARP funds. Proprietary trading blew up some of our biggest financial institutions and froze lending to businesses on Main Street across this Nation. We need to have a firm separation. We need to make sure that if you are buying fireworks for the Fourth of July, you are not storing those in the living room. By that I mean high-risk investing is the fireworks, and you don't store them in your living room where you are doing the lending so important to Main Street. This is a Wall Street-Main Street battle. My colleague Senator Levin and I have been working on this for quite some time. We need to make our financial system work better for America. Two days ago, we offered to have our amendment voted on, not with a 50-vote standard but with 60 votes. The leadership across the aisle thwarted that unanimous consent request and said: You may not have a vote on your amendment. Not even at 60 votes? No, you may not. Not even with two Democratic Senators off in their home States because they had primary elections? No, you may not. You may not debate this amendment on the floor. Quite frankly, that is the result of pressure from Wall Street saying that fundamental financial reform should not be discussed in this Chamber. What is this Chamber? Is this Chamber a puppet to Wall Street or are we a serious gathering of men and women from across the Nation whose responsibility is to build a better financial system? Another fundamental piece of this amendment is to end the conflict in securities. This is simple. If you design securities and you sell them, you don't take out insurance on them because you think they might fail after you have sold them. That is a fundamental conflict of interest. That is like somebody who wires your house; you bring them to your house and you say: Please do the wiring or fix the wiring. And they take out a fire policy on your house because they know they did such a bad job, they think your house is going to burn down. You would never hire that electrician. Or it is like a car dealer. The dealer says: I will sell you this car. And after they sell it to you, they take out a life insurance policy on you because they didn't do the brakes right. It would make you pretty nervous. You would not buy a car from an auto dealer who has taken out an insurance policy on your life. That is a simple issue addressed in the securities provision of this bill. We are hearing word that Republicans are going to go through a parliamentary maneuver, even though our amendment is now in order and pending, to kill debate on the pending Merkley-Levin amendment. We hope that is not true, but we are hearing that in not so many minutes, sometime this evening, there is going to be a process to kill the amendment our amendment is attached to so there will be no debate on this issue. I cannot believe the Senate of the United States is afraid to have a debate and vote on fundamental financial reforms important to the integrity of our securities and important to Main Street getting loans. But that seems to be where we are headed. I hope I am wrong. I hope my colleagues from across the aisle will come out and say: No, we have reconsidered. We think this body should debate serious issues. You might win, you might lose, but we should hold the debate. We have asked the Republican leadership to sever the connection between our amendment and the Brownback amendment, which are on different topics. One is on fundamental financial structures, and one is on automobile dealers and whether they are covered by the Consumer Financial Protection Bureau. We said: Sever them. Let each have a separate debate. They have told us no. They will not sever the connection and allow a debate on each topic. That is why, if the primary amendment is withdrawn, ours will go down, too, and the people of the United States will be deprived of having a legislature that debates seriously the structure of reform. I will wrap it up. I know my colleague is going to expand on these remarks. It has been a pleasure working with him. It has been a pleasure working with the Banking staff. But before I conclude, I want my colleagues to know that based on the conversations I have had in this body, if we were to have this vote, we would win tonight, based on the comments of folks who say they either support or are strongly leaning toward supporting it. That means we would go to conference with a very strong position, as we should. If this is withdrawn tonight, if we are not able to have this debate and vote, I hope the leadership on both sides of the aisle will say, even though we didn't debate it, we will take this strong position for financial reform to the conference. The USAA, which is a group that serves our veterans, has commented about this amendment. They said: Senators Merkley and Levin recognize the value of insurance company investments which already are subject to well-defined state insurance restrictions. . . . In that vein, we urge you to support the amendment and include it in the Restoring American Financial Stability Act that is passed out of the United States Senate. May 13, 2010. A person from the Washington Post writes: Probably the most important amendment comes from Sens. Carl Levin and Jeff Merkley, Democrats from Michigan and Oregon, respectively. It would replace the vague language of the Dodd bill, which gives discretion to regulators as to how much proprietary trading they would allow, with a clear provision banning federally insured banks from such trading respectively (the ``Volcker rule''). If the banks want to turn themselves into casinos, they can--but if Merkley-Levin passes, they would do so without taxpayer support when their bets go sour. A New York Times editorial: The Senate bill also imposes needless delays on the enactment of the so-called Volcker rule, which would bar banks from making risky market trades for their own accounts and from owning hedge funds and private equity funds. Senators Carl Levin of Michigan and Jeff Merkley of Oregon, both Democrats, have an amendment to enact the Volcker rule without undue delays or tinkering. The Independent Community Bankers of America is asking for this to be passed to strengthen our financial system. The Campaign for America's Future, the former head of Citibank, who watched as the two sides of his bank collided in a spectacular disaster, are supporting this amendment. This amendment should be debated and voted on on the floor of the Senate. To do otherwise would not fulfill our responsibility to the people of the United States of America. Thank you very much, Mr. President.

Mr. MERKLEY

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

Mr. MERKLEY. Mr. President, I offer a second-degree amendment which I send to the desk.

Mr. MERKLEY. Mr. President, I ask for the regular order in regard to amendment No. 3789.

Mr. MERKLEY. Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. MERKLEY

Mr. MERKLEY. Mr. President, I suggest the absence of a quorum.

Mr. MERKLEY

Mr. MERKLEY. Mr. President, I know I put my colleague in a terrible spot by asking that question. But I do think the citizens of our Nation deserve an explanation as to why we are here tonight and not currently debating any of a whole list of amendments that Members of this body wanted to bring forward about how we improve our financial system. The amendment, No. 4101, is an amendment that is cosponsored by Carl Levin and myself and about 20 other Senators in this body. There are not that many amendments that have 20-plus cosponsors. I will tell you that it is not the number of cosponsors, although that indicates a genuine interest among colleagues in debating this; it is the substance that goes to the heart of the conversation between Wall Street and Main Street. This amendment is about how we aggregate capital in our country and how we allocate it. How do we get money where it does the most good to build our economy and build the success of our families? We have a couple of different ways of doing that in our Nation. One is that we make a deposit in a bank, and the bank also has access to the Federal Reserve window, where they get very low cost loans. The intent of us providing both access to the Fed window and the low-cost loan and providing a government insurance on deposits is that this money is going to go into loans to our families and our small businesses. That access to capital is absolutely essential for building our small businesses. Right now, our businesses are having a difficult time accessing capital. I bet every Member of this body has gone around their States and heard the stories I hear in Oregon. I hear about credit lines being cut in half or eliminated. I hear about projects where they are ready to seize a business opportunity but that opportunity is blocked because they cannot get a loan they would have gotten in a heartbeat last year or 2 years ago or 3 years ago. Those opportunities are not just about the success of the business; they are about the success of our families because when those small businesses expand, they put people to work. Right now, access to capital is frozen through much of our economy, inaccessible to our families and small businesses to be able to seize those opportunities to expand. Why is that? It is because we put in the same house both our lending system and our high-risk investing system. Both of these work very well. Let me explain the high-risk investing side. If you are so fortunate as to have a big chunk of capital, you may say: I am going to put this into this private equity fund or venture capital fund or this hedge fund, and they are going to have some very capable managers who are going to look for investments--often high-risk opportunities. They will scour the United States, and they are going to find opportunities to invest. A lot of the time those investments pay off handsomely. Those who are fortunate enough to have the funds to be able to put them into such investment vehicles often do very well. Occasionally, the bets that are made go awry. Why is that? Well, a fund says: You know what, there is a huge new opportunity in Russia, for example, because the price of oil is going up and they have a lot of oil they want to develop. They are changing their rules and there are new opportunities for business to thrive and take advantage of those new rules. So they invest in Russia, but something goes wrong and the price of oil drops and their investments blow up--suddenly, the investment fund blows up. If that investment fund is by itself, it doesn't really hurt the rest of the economy. As long as it is by itself and not systemically so large that it poses a huge risk to the rest of the economy, and it goes bust, the investors simply lose their money. No harm done. But if it is inside of a bank, now you have a problem because when that goes bust, the bank is responsible for the responsibilities of that fund, and the result is that the bank goes down. We saw that Citibank went down. We saw so many other big banks--when I say ``went down,'' I mean they had huge losses. Citibank is still alive. I know the folks in South Dakota will be happy to know that. They had huge losses, and the former chair of Citibank believes we need to separate the high-risk investing and the function of depositing, accessing money through the Fed, and making those loans to our families and small businesses so they can thrive. It is a separation between two functions. I would be happy to yield to my colleague if he wants to explain why he is objecting to having a debate on the floor of the Senate that is a debate that is so important to the success of our small businesses, so important to the success of our families, that is so important because we should have learned over what happened in the last 2 years that if these two functions are combined, they hurt each other. Why would we not want to debate the diversion of money out of the hands of our small businesses and into Wall Street? I would yield if my colleague across the aisle would like to say why he is objecting to having this debate tonight. If he would like to jump up later and explain it, I will take that comment at that time. We cannot do our job here in the Senate if a Senator blocks the debate of issues that are important to the success of our Republic. We cannot do our job here in the Senate if a Senator blocks the debate of issues that are important to our families. We cannot do our job if folks, on behalf of Wall Street giants, come to the floor and object to the debate of fixing our financial system so our small businesses can thrive. I can tell you this: Back home, people know that this body helped out the biggest corporations in America last year in a very difficult time for them, when many of them would have gone bust. They want to know why this body, tonight, is unwilling to debate changes in the law that will help the small businesses of America, changes that will help the families of America, debate that will enable us to discuss improving our system so that we can have decades of solid growth in the years ahead. Why should Wall Street veto a debate in this body tonight for Main Street? I can't explain that to the folks back home. I can't explain to the folks back home that we have an amendment that has been carefully worked on for months; that there are colleagues on both sides of the aisle who wanted to have this debate; that we have an amendment that was worked on very carefully with experts from Wall Street to make sure we got it right; that we have an amendment about which the Treasury Department called in experts, brought them in through meetings and said: Here is the challenge, here is what you need do and how you can fix it. How do I explain to them that, with all that work, we could have a rational debate. But it isn't going to happen because Wall Street is asking colleagues to block the debate for the American people. Why is Wall Street winning and Main Street losing tonight? I would like an explanation. The American people would like an explanation. Another piece of this bill says that nonbank financial organizations--by this, you can simply say hedge funds and equity funds, funds that pool money and make risky investments--that if they are so large, they pose a risk to the economy as a whole, then the regulators can add additional capital requirements, so they have to set aside more dollars for every dollar they invest. Two years ago, the SEC lifted the capital requirements on the largest five investment banks in America. Bear Stearns went from 20-to-1 leverage to 40-to-1 leverage in 1 year. What do I mean by that? For every dollar they set aside in case investments went bad, they invested $20. So you only had to have a 5-percent drop in value to wipe out what they set aside. At the end of the year, they got 40-to-1 leverage, and that meant for every $100 invested, they only had $2.50 set aside, and you only needed 2.5 percent reduction in investments to go bust. What kind of regulation system would allow 40-to-1 leverage? Should we not have a debate on the second main piece of this amendment, which says that regulators, when you have a systemically significant firm, can increase the leverage requirement, increase the capital set aside, so that firm is not operating in a way that it can bring down our economy or punch a huge hole in our economy? So the first part of the amendment says that high-risk investing is wonderful for allocating capital but do it away from our lending system so that our small businesses and our families can have access to a steady flow of capital, so that capital will not be frozen when investments go bad. The second part of the amendment says: Give the regulators the power to increase the capital requirement when they are large and can tear a big hole, so if they do crazy, risky things and they lose, they do not hurt the rest of the economy. I think it is common sense. Why is that debate so scary to my colleagues who are objecting to it tonight? This is not about whether the amendment wins. We offered tonight to have this vote with our arms tied behind our back and one leg. What do I mean by that? We offered to have this vote tonight with a 60-vote requirement, even though a number of Democratic Senators are missing--a supermajority requirement so that we can have a debate on Main Street about Main Street, about Main Street working better. But Wall Street asked colleagues to block this debate. That is wrong. The third part of this amendment says we need integrity in writing securities. This is the superb work of my colleague, Senator Levin. I know he will expand on it in due course. But here is the thing. A system with integrity is good for allocating capital efficiently because people want to invest in a system that has integrity. When we established the Securities and Exchange Commission to oversee the stock world, people gained more faith that the system was not rigged. They were more willing to buy stocks and, by that fashion, invest their moneys in the companies of America, build those companies. The success of those companies was good for our families--our working families--and the jobs that went with them. But now in securities, we have a very opaque, a very dark market where only a few companies have control of the information and people do not know what the price point is, and they do not know what the details are. We have swaps being written where if you participate in it, you do not even know who is on the other side of the deal. There were folks doing deals with middlemen on Wall Street, and they did not know who the insurer was. They did not know it was AIG on the other side of the deal. When you buy insurance, you want to know who the insurer is. They could not get access to that information. In securities, here is the thing. Right now, we have companies that while they are designing and selling securities also are betting against the success of those securities. I must say, that does not instill much confidence in the integrity of the system. I ask my colleagues, and I ask the citizens of this country: Would you like to buy a car from someone who would not tell you whether they installed brakes and who was taking out an insurance policy on your life; they are betting you are going to get in a wreck? You would say: No, I would not want to buy a car from someone who is not telling me if they put in the brakes and is taking out a life insurance policy on my life. I would be scared to death to buy that car. The story goes on. Would you buy a loaf of bread from someone who would not tell you what the ingredients were and you do not know if it is a good loaf of bread, and they are taking an insurance policy out on your life? You would be worried about the ingredients in that bread. That is the problem we have in the securities world. It is a very simple approach that Senator Levin has laid out in which it calls for integrity in securities. If you are designing and selling them, you do not bet against them. There are all kinds of details that have been put into these three parts of the amendment to make them work. Actually, there is nothing in this amendment that is very far outside a core set of issues being considered. Modern bank holding companies do a lot of things. They do wealth management. They do broker dealers in securities and other financial products. They do market making where they help bring together this group that wants to buy and this group that wants to sell. They make loans to power up our families and our small businesses. All those functions continue in our bill. But amidst that set, there is one thing that is being carved out, and that one thing is high-risk investing. When Merrill Lynch blows up, you do not want it to take down Bank of America. Two years ago, Merrill Lynch blew up. It would not have taken down Bank of America because it was not in Bank of America. But it is today. It is a riskier system we have today than 2 years ago. We should have a debate about this on the floor of the Senate. Bear Stearns, 2 years ago, was by itself. But now it is part of JPMorgan Chase. If Bear Stearns, 10 years from now, makes investments that go awry and it goes down, it blows up a major lender. These types of bankruptcies need to not be a situation where they send shock waves and paralyze our economy. So common sense: more collateral, if you are a huge investor, set by regulators at a rational level with appropriate hearings. That high-risk investing, do it under a different roof so if it blows up, it does not affect lending, and those securities--a little bit of integrity in the marketing of securities. These are simple ideas. These are commonsense ideas that will make our financial system work better for everyone, making it more feasible for our small businesses to gain access to credit, making it more feasible for our families to gain access to credit, making it less likely that a major disruption in investing is going to freeze up those loans and the result is that credit lines are being cut so they cannot expand business and cannot hire. That is where we are now. We are frozen. In mortgages, we do not have a functioning securities market right now. It is important because banks make loans and then they sell them on to the market. But they can only sell them if the market has somebody to sell to. Right now investors are leery, and they should be leery when there are these conflicts of interest that the good work my friend from Michigan has done addresses. This debate should happen. It is wrong for a Senator to object to the people of the United States having their day to talk about a financial system that works for small businesses and works for families. I know my colleague from Michigan is prepared to expand on the work he has been doing. At the close of my remarks, I wish to thank many of my colleagues who have been immersed in this effort to design a better financial system. Senator Dodd and his team on Banking have been working night and day looking at every angle to get this amendment right. My friends at Treasury--I cannot tell you how many nights they have been up working, consulting with folks who are deep in the industry, to understand what works and does not to get this right. Senator Levin's team and my team have been working so hard in consulting and facilitating and writing and rewriting so we could have this debate in a responsible way tonight. We did not want to have a debate where we had an amendment that was illogical or had rough edges that had not been sanded off. We wanted to have a responsible debate. We may not have had the votes necessary to adopt the amendment. We do not know. That is a mystery. But what we know for sure is that the people of America have been shortchanged tonight by some colleagues at the request of Wall Street blocking consideration of this amendment, and that is not right. I yield the floor.

Mr. MERKLEY. Mr. President, I ask unanimous consent that the pending amendment be set aside and that my amendment No. 4101 be brought up, considered as read, and that a vote be held at 9 p.m. this evening.

Mr. MERKLEY. I thank the Senator. I think it would be useful if the citizens of our Nation were to know who was objecting and that the names be read into the Record. I think the citizens have a right to know where their Senators stand on this issue. It is an ideal time to let the citizens know who is putting the secret holds on this amendment.

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

Mr. MERKLEY. Mr. President, earlier this evening, my colleague noted that philosophically he shared some interest in this amendment. Others were objecting to it. I wonder whether he would share, in the interest of the debate--and Senator Wyden was just speaking to it, and Senator Grassley was also--who is objecting to this amendment being debated tonight.

Mr. MERKLEY

Mr. MERKLEY. Mr. President, I ask unanimous consent that there be 2 minutes of debate prior to the first vote, equally divided between the two sides.

Mr. MERKLEY. Mr. President, today, we have two amendments that address integrity in retail mortgage origination. I am certainly encouraging you to place your vote squarely for the Merkley-Klobuchar amendment. This amendment is critical to end no-document liar loans--a big factor in the meltdown that occurred last year. Second, it establishes underwriting integrity so that underwriters will look at loan to value, credit history, and current obligations-- again, integrity of mortgages--which enables loans to be securitized and creates liquidity so families can get loans at a lower interest rate. Third, the Merkley-Klobuchar amendment ends steering payments. This is essential. The originators have been in an awkward position where they have been paid bonuses for making deals that weren't in their clients' interests.

Mr. MERKLEY. I yield back our time.

Mr. MERKLEY. Mr. President, I ask for the yeas and nays.

Mr. MERKLEY

Mr. MERKLEY. I ask unanimous consent to dispense with the reading of the amendment.

Mr. MERKLEY. Mr. President, I call up amendment No. 3962, the Merkley-Klobuchar amendment.

Mr. MERKLEY. Mr. President, I compliment my colleague from Minnesota for the incredibly solid and important work she has done on this topic. It goes right to the heart of building a family's financial foundations. There is a lot of movement that needs to be made to restore a framework that will build those foundations rather than destroy those foundations. I yield to my colleague from Connecticut if he wishes to make remarks on this amendment?

Mr. MERKLEY. I ask unanimous consent Senator Kerry, Senator Franken, and Senator Levin be added as cosponsors.

Mr. MERKLEY. Mr. President, I thank the bipartisan cosponsors of this amendment, including Senator Snowe, Senator Scott Brown, and Members on both sides--my colleague, Senator Klobuchar, will be speaking in a moment--Senator Begich, Senator Boxer, as I mentioned, Senator Kerry, Senator Franken, and Senator Schumer. I would like to applaud my colleague from Tennessee. Virtually every word that Senator Corker stated tonight is an argument for this amendment that Senator Klobuchar and I are cosponsoring. I will get into the details later because I want to yield time to my colleague from Minnesota and then my colleague from Connecticut to speak to the bill. Then I will offer my remarks. I do think it is important to recognize that the bulk of what Senator Corker addressed goes right to the heart of this amendment as well. There is a point of distinction between the two amendments, a critical point of distinction; that is, the 5-percent underwriting absolute line. That line is a line of great concern for those of us who have had experience with first-time home buyers, those who have had experience with families who are at the bottom of the income spectrum. I should make it clear that the downpayment is only a portion of the skin in the game that such families have because there are tremendous closing costs associated with these loans that the families must bear as well. So the inflexibility of that standard is a great concern and a great point of distinction between these two amendments. I will continue on after my colleagues have spoken to address some of the major challenges this amendment addresses, but I would like to yield 5 minutes to Senator Klobuchar.

Mr. MERKLEY. Mr. President, before I speak on this amendment, I want to applaud my colleague from Connecticut who spoke so passionately and knowledgeably about the challenge that had been faced by subprime underwriting gone astray. If only the letters that he and his colleagues wrote in 2006 and in 2007, those multiple appeals, if only those who had the power to establish those underwriting standards had been listened to, had been followed up on, then we would have a much smaller challenge today. We would not have had this big meltdown in 2008 and 2009, with so many millions of American families having the value of their home destroyed. I applaud him for his advocacy year after year after year. I am pleased to be able to join him in this effort now. I particularly applaud the efforts to establish standards for skin in the game. This is a very responsible way to create accountability for our mortgage originators. I do want to note that there are three issues that particularly contributed to dysfunction at the retail mortgage level. The first is liar loans, undocumented income, where a mortgage originator would tell the client: Well, we will just pencil in here that you earn $150,000. It does not matter. Don't you worry about what you are earning. We will put this in here. That obviously led to a complete corruption of the quality of the mortgage. Certainly the families involved had no prospect of paying for those mortgages and the interest rates they were being signed up for. A second was to fail to employ basic underwriting measures, measures like loan to value and credit history and employment history, and current obligations and debt to income, and so forth. These are the types of measures any responsible originator goes through to understand whether this loan makes sense for this family, whether there will be the ability to repay. The third piece is the incentives that were provided to mortgage originators put those originators 180 degrees out of sync with their customers. Essentially, it worked like this. If a loan was good for a family, it didn't make as much money for the lender. If it was bad for a family, it made a lot of money for the lender. So the lender and the home buyer have different interests; one wants a low-interest mortgage, a fair mortgage; the other wants a mortgage that has hidden clauses, prepayment penalties, and exploding interest rates. But incentive payments, sometimes called steering payments, technically called yield spread premiums--these were paid to the mortgage originators to induce them to sign those families they had taken into their trust into a loan that was good for the lender but not good for the family, corrupting a transaction at the heart of the most important financial moment in a family's experience, the moment of buying their family home. This amendment addresses all three of these core pieces of dysfunction in the mortgage market. It ends no-documentation or liar loans as they are called, where income is created like writing a work of fiction. It sets minimum underwriting standards related to loan to value, ability to repay, and ability to repay not based on some teaser rate but on any rate the loan could potentially go up to in the first 5 years. So you make sure, if this has a variable rate clause, that this family will be able to manage those payments in the first 5 years and certainly verification of income in the process. So you have documentation and verification, essentially the sound underwriting process that was in place for decades before it all went awry over the last 10 years. This amendment will apply to all loans. It amends the Truth in Lending Act or TILA, which applies to all loans. It will base broker compensation on the size of the loan and on the loan value or the loan amount and the volume of loans a broker makes, rather than on the type of loan. We take this impossible situation that mortgage originators were put in, where their interests were 180 degrees reversed from the client. Yet it is a trust relationship, it puts them in sync, where the broker has no incentive to steer a family into an exploding interest rate, no incentive to steer a family into a loan with a prepayment penalty, no incentive to steer a family into a loan that has other hidden clauses designed to strip wealth from working families. Finally, this amendment provides a safe harbor to make sure mortgage originators are on sound ground if they follow this set of originating principles and, in the process, makes sure they do not do balloon payments or fees that exceed 3 percent, a series of sound business practices that serve the industry and serve the family. I mentioned before that my colleague from Tennessee has a bill that has many of these mortgage underwriting standards. I applaud him for his long experience and concern in helping families to succeed. But we do disagree about two provisions. One provision is stripping the skin in the game that makes sure mortgage originators have a stake in the quality of the mortgage. The second is to establish a solid line on a 5-percent standard. Many families, when they are buying a modest home, have a significant expenditure in all kinds of closing costs, independent of their downpayment. They may well have thousands of dollars, $5,000, $8,000 of skin in the game before they ever get to the downpayment. So we want to create the flexibility for first-time home buyers and for families on the lower end of the income spectrum to be able to get into home ownership. In fact, frankly, it is these families for whom it is so important we make the mortgage process available. Because a young family who is able to buy that first home and do so with the responsible underwriting principles laid out in this amendment, in 5 years they will be buying their second home, maybe a bit nicer home, maybe an extra bedroom or two for the children, and maybe later on they are able to move up again to the sort of home they have always dreamed about having or the sort of yard with the trees in it that the treehouse is going into and so forth. That is the American dream, to be able to engage in this progression. You engage in that progression because you build equity. You build equity by getting into home ownership at the start. Having solid underwriting standards but not an inflexible line is the way to go on this. I do note that the amendment Senator Klobuchar and I are offering is supported by a host of organizations: The Center for American Progress, the Center for Responsible Lending, the National Association of Consumer Advocates, the National Consumer Law Center, the National Fair Housing Alliance, Consumer Action, the Housing Finance Alliance, and Mortgage Insurance Companies of America. This is a bipartisan sentiment to restore solid mortgage underwriting standards. I appreciate the thoughtfulness and energy that has gone into it from both sides of the aisle to craft ways to approach this. When we vote tomorrow morning, I ask all my colleagues to vote yes for strong underwriting standards. Vote yes for putting mortgage originators in sync with their clients rather than radically oppose the interests of their clients. Vote yes to end liar loans. Certainly, vote yes for the young families and those families with lower income who wish to get into that first home so they can get their share of the American dream. I yield the floor.

Mr. MERKLEY

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

Mr. MERKLEY

Mr. MERKLEY. Mr. President, in honor of National Nurses Week, I wish to recognize the more than 3 million nurses who work hard day-in and day-out to give patients the care they deserve. Because my wife Mary is a nurse, I have seen firsthand what an enormous impact nurses have on both patients and families. Their compassion and devotion to their patients give families the peace of mind that their loved ones are in good hands. They also play an irreplaceable role in making sure our hospitals and clinics run smoothly. Unfortunately, many nurses are overworked, underpaid, and our hospitals and clinics have trouble retaining them. Through the Health Care Reform Act Congress passed earlier this year, we made significant strides in addressing many of the challenges nurses face. We expanded the nursing student loan program to help make nursing programs more affordable. We also expanded the nursing loan repayment program and scholarship programs to students who commit to working at an accredited nursing school for 2 years. This will help ensure our nursing schools have the teachers they need to train additional nurses. We invested $1.5 billion over 5 years in the National Health Service Corps scholarship and loan repayment program for primary care providers, including nurses who practice in underserved areas. In addition, we included $50 million in grants for nurse-managed health clinics that offer primary care and wellness services to low-income and uninsured Americans. While we made good progress easing many of the difficulties nurses face, much more still needs to be done. Nurses play such a crucial role in the delivery of care. We need to provide them with the resources they need to do their jobs. The nursing shortage also remains a serious issue, especially in hard-hit rural areas. To find commonsense solutions to the problems nurses face, I formed the Senate Nursing Caucus with Senator Johanns, Senator Mikulski, and Senator Snowe. I urge all of my colleagues to join the caucus to help strengthen the nursing profession and advance the goals of the nursing community. Together, we will explore ways we can enhance the role nurses play in our health care system and address the nationwide nursing shortage. I ask my colleagues and my fellow Americans to take a moment during National Nurses Week to show your appreciation to nurses across the country for their hard work, commitment, and dedication to their patients. Their dedication is invaluable to the success of our health care system and, most of all, to the patients who depend on them. Thank you, Mr. President.