Richard Shelby

Mr. SHELBY

Mr. SHELBY. I would like 3 minutes.

Mr. SHELBY. Mr. President, I have a few minutes, but first I wish to commend my colleague and fellow member of the Banking Committee, Senator Corker, for his work in this regard, trying to forge a compromise. Of course, I think most of you know where I stand on bailouts. I do not think they work. I do not believe this one would ever work. But these companies could be saved. These companies could be saved. I have said I think they are bloated, the management is bloated. These companies either have already failed or are failing. That is a shame. These are not the General Motors, Ford, and Chrysler I knew. But all of us in America will benefit by competition. I come from the South, where we have a growing automobile industry, but there are 300 million people in this country, the largest automobile market in the world. There is no reason for General Motors, Ford, and Chrysler not to be competitive, but they are not going to be competitive, folks, as long as they are operating under this business model. Whether they get money soon or next year or what, it is going to be probably a lot of money. But I want to tell the American people tonight, bailouts generally do not work. And this is a huge proposed bailout. I fear it is just the downpayment on more to come next year. So I would vote no on this tonight.

Mr. SHELBY

Mr. SHELBY. Madam President, I ask unanimous consent to be recognized to speak for up to 15 minutes.

Mr. SHELBY. Madam President, I rise today to speak before we take what will be one of the most important votes, unrelated to war, many of us will cast in the U.S. Senate. The proposal before us provides $700 billion to buy illiquid assets from financial institutions. The stated goal of this scheme is to return confidence and liquidity to our credit markets. We did not get into this situation in a matter of days, and we are not going to fix it with a piece of legislation quickly cobbled together in back rooms of the U.S. Capitol. In fact, this crisis has been years in the making. Over the last decade, trillions of dollars were poured into our mortgage finance markets, often at the direction of well-intended, albeit ill-conceived, Government programs. At first, the money backed conventional mortgages with standard downpayments and properly verified incomes. Over time, the number of home buyers who met conventional loan requirements dwindled. In order to fuel the upward spiral, mortgage products became more exotic, requiring less of borrowers and involving more risks. Without regard for fiscal prudence and simple economics, mortgage brokers, realtors, homebuilders, mortgage bankers, and home buyers created the conditions that helped inflate the housing bubble. At the same time, Wall Street was developing ever more sophisticated finance vehicles to ensure that money continued to flow into the mortgage markets to meet the demand. Mortgages were pooled, packaged, and rated ``investment grade'' by the credit rating agencies. They were then sold into a market eager to purchase securities with a wide range of risks and yields. Many purchasers employed massive amounts of leverage, layering risk upon risk in an effort to maximize return. To cover their risks, many of these buyers also bought credit protection from one another, entering into derivatives contracts with nominal values in the hundreds of trillions of dollars. Eventually, economic reality caught up with us. Housing prices stalled and then began falling. Many who bought homes with unconventional loans were unable to afford their rising payments. Because home values were dropping, they were unable to refinance and delinquency rates skyrocketed. This trend has not yet abated. Once homeowners began defaulting, the value of mortgage-backed securities plummeted. Collateralized debt obligations, or CDOs, that were comprised of the riskiest mortgage-backed securities became worthless. As a result, financial institutions holding securitized assets have suffered enormous losses and have been desperately trying to raise new capital. I have been a member of the Senate Banking Committee for over 20 years. When I joined the committee, the savings and loan crisis was just beginning to unfold. Let me remind my colleagues that it took nearly 10 years, five Congresses, and 3 administrations until that smaller, more contained crisis was resolved. Personally, I learned a few solid lessons from that experience. I came to understand that bank management, bank capital, and sound regulatory policy make a major difference. What I learned then has guided me ever since. For example, in 1995, I opposed the expansion of the Community Reinvestment Act. I did not take this position because I am against lending to minorities or low-income individuals. My concerns were based on the simple fact that credit cannot be safely extended on any basis other than risk, and risk cannot be mitigated through social engineering. The appropriate allocation of credit is not political, it is based on merit. Those with good credit receive the best terms and lowest rates. Those with bad credit receive the worst terms and the highest rates, or in some cases, no credit at all. The CRA was an attempt to get around this fact and it failed. I remind my colleagues of this as we prepare to buy assets backed by the very same mortgages born of this flawed policy. I find it ironic that many of those who supported the legislation that upended the basic concept of risk-based lending are now saying that our present circumstances are an indication that the free market failed. Federal policy, not free market decisions, fueled risky loans to unqualified borrowers. In 1999, I opposed the financial modernization bill. Despite Alan Greenspan's proclamations, I did not think it provided a sufficient regulatory structure to oversee the financial system it created. I was also concerned that it lacked some basic consumer privacy protections. Many are now claiming that deregulatory effort led us directly to where we are today. In 2001, I became concerned about the banking regulators' effort to modernize bank capital standards through what is known as Basel II. While it was very important to update those standards, it appeared to me that ``modernization'' was focused more on reducing bank capital levels than improving bank capital standards. During the process, it often seemed that the regulators were more interested in industry priorities than protecting the banking system. I spent nearly 5 years trying to ensure that the regulators produced a balanced rule that focused on safety and soundness. When I became chairman of the Banking Committee in 2003, I immediately became concerned with the financial health and regulatory structure of the Government sponsored enterprises, Fannie Mae and Freddie Mac. I did not think the entities had sufficient capital, management controls, or regulatory oversight. I was particularly troubled about their size because their combined portfolios amounted to nearly $2 trillion at that time. I believed that their operations posed a systemic risk to the financial markets. After each disclosed that they had committed serious accounting fraud, my concerns grew more focused and I stepped up my efforts to pass legislation. Those efforts were rebuffed by the Democrats on the Banking Committee. And, let us be clear as to what the GSEs were doing at this time. From 2004, when we began considering GSE legislation, up until very recently, the GSEs went on a nearly trillion dollar sub-prime and Alt-A mortgage-backed security buying spree. Madam President: $1 trillion. I do not know for sure what motivated them in this effort, but I do know the GSEs were spending hundreds of millions of dollars lobbying Congress in an effort to stave off additional regulation. Fannie's and Freddie's greatest allies were those that advocated and, at times, demanded that the GSEs continue to facilitate sub-prime and Alt-A borrowing. As long as they complied, real regulation was dead. This symbiotic relationship, in turn, fueled an already over heated market to grow even hotter. As the driving force in mortgage finance, this purchasing effort also broke down what scant underwriting standards remained in the market place. Many, if not most, of the toxic assets that this taxpayer-funded bailout is designed to buy were originated in an atmosphere created by the GSEs and facilitated by their supporters here in Congress. During the securitization boom that took off in the last 5 years, I also became very concerned about the regulatory oversight of the credit rating agencies whose ratings were crucial to getting securities sold. When I looked at the system in place, I soon realized it was dominated by two companies and that the regulatory structure provided no real oversight and actually prevented competitors from entering the market. Considering the value that mutual, money market, retirement pension funds, and insurance companies, and other important investors place on the ratings, I recognized that immediate legislative action was necessary to address the shortcomings of the oversight regime. We took that action in the fall of 2006. Unfortunately, it now appears even that effort came too late. The rating agencies provided investment-grade ratings on securities worth hundreds of billions. A large percentage of those ratings have since been downgraded. I remind my colleagues that those securities also happen to make up the troubled assets that are now the focus of this bailout. Finally, in 2007, I publicly questioned the adequacy of the Securities and Exchange Commission's Consolidated Supervised Entities Program. This nonstatutory program was put in place by the SEC to allow the five big investment banks to meet European regulatory standards without having to submit to Federal Reserve supervision as provided in the Financial Modernization Act. The program also allowed the investment banks to significantly reduce their capital requirements. Because I already felt that the 1999 act did not provide adequate supervision, I was troubled that the investment banks continued to chafe even at this minimal supervision. With their trillions in assets, global operations, and hundreds of thousands of employees, they were content to be ``regulated'' by a program with a staff of less than 20 people, and they vigorously lobbied the Banking Committee to keep it that way. Needless to say, I had serious concerns about this arrangement. These concerns crystallized when Chairman Dodd marked up legislation that would not only have codified the SEC's regulatory concoction, but also would have expanded the powers of the investment banks, allowing them access to taxpayer-insured funds through ownership of insured depositories. I requested that the Banking Committee hold hearings to examine this structure in greater detail before we ratified that which the SEC created through regulatory fiat. Once again, we did not. Instead, my Democrat colleagues voted not only to codify the CSE program, but also to expand it. My Republican colleagues voted to reject it and argued for additional committee action. Today, the CSE program is gone because our investment banks have either gone bankrupt, merged, or become that which they fought so hard to avoid: Bank holding companies supervised by the Federal Reserve. I would also like to point out to my colleagues that a large number of the assets that will be purchased under the Paulson plan were either originated or held by the CSE regulated firms: Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley, or Goldman Sachs. We did not get to where we are today by accident, it was a path we chose. My warnings about the risk of basing credit decisions on well- intended social mandates rather than sound, fact-based underwriting were dismissed. My concerns about the inadequacy of the regulatory structure put in place in the financial modernization legislation went unacknowledged. My efforts to ensure that bank capital standards were designed to ensure safety and soundness, rather than industry concerns, were conducted largely alone. When I urged focus one of the SEC's Consolidated Supervised Entities Program, my Democrat colleagues ignored me and instead voted to ratify and expand the program. When we attempted to pass meaningful GSE reforms, we were repeatedly stopped. I commend Senator Dodd, who in the end, worked with me to pass a bill. Unfortunately, that effort came too late because the GSEs had already gorged on billions of dollars of toxic sub prime paper and no longer could function on a stand-alone basis. As often as I have argued that we needed to address systemic risks in the financial markets, my advice has been dismissed, and my concerns have proven to be fully justified. I now have serious concerns about the bailout package we are preparing to pass. My foremost concern relates to the manner in which we are attempting to address the problem. The Paulson plan focuses on a single problem--illiquid assets held throughout the financial system. I believe we have a number of interrelated problems that need to be addressed in order of their significance. First, and most urgent, is liquidity. Then we must address the solvency of our financial institutions and declining home values, not to mention our entire regulatory structure. I believe Congress can address the liquidity issue by increasing the combined resources of the Federal Reserve System and the Treasury. By enhancing the Federal Government's existing lending facilities and guarantee programs, we can help stabilize money market funds and provide loans to troubled financial institutions without exposing taxpayers to massive losses. This act alone would allow us some time to consider thoroughly our next steps. Thereafter, we must determine how to address the troubled assets on the books of financial institutions and continue the process of dealing with declining home values. This will likely be a long and difficult process, a fact that is not being shared with the American people. As long as we address the immediate liquidity problem by expanding lending facilities using the illiquid securities as collateral, we can then take the necessary time to do our work in a more responsible and thoughtful manner. It appears, however, that we are not going to subject this bill to our normal process. With that in mind, I would like to take some time to look more closely at what this unprecedented piece of legislation would do. The Emergency Economic Stabilization Act of 2008 would create the Troubled Asset Relief Program. It would authorize the Treasury Secretary to purchase up to $700 billion worth of troubled assets from just about any type of institution. In exercising this authority, the Secretary would be vested with nearly unfettered power. The Secretary could purchase any financial instrument he deems necessary to promote financial market stability. He could purchase not only mortgage-related assets, but securities based on credit card payments, auto loans, or even common stock. The Secretary could purchase assets from any institution, not just financial institutions so long as they have ``significant operations in the United States.'' What constitutes ``significant operations'' is left undefined, leaving the Secretary a great deal of latitude in determining which institutions would qualify for the program. Certainly the Secretary could purchase assets from private equity firms and hedge funds, but also corporations and State governments. Given the lack of standards and the breadth of the Secretary's authority, it should be no surprise if politically connected entities get special treatment under this program. Under a provision hidden deep in the legislation, the Treasury Secretary also has the authority to purchase troubled assets from foreign central banks and governments. The Secretary has unlimited authority on how the purchased assets are managed and sold. Treasury could even set up Government-run hedge funds that compete with private companies. While the Treasury Secretary's authority expires at the end of 2009 and can be extended for only 1 additional year, the Treasury's authority to manage purchased assets is perpetual. Treasury could also purchase assets after the termination of its authority, if it has entered into agreements to purchase prior to the termination date. This program will be with us for decades to come. The few restrictions imposed on the Treasury Secretary's authority could undermine the effectiveness of the program. If the Secretary purchases more than $100 million in troubled assets from an institution, he must obtain non-voting common stock or preferred equity in the institution. To complicate matters further, the bill does not provide clear guidance on how many warrants the Secretary should obtain or what their terms should be. If the Secretary makes direct purchases of troubled assets, the selling institution must adopt standards on executive compensation and corporate governance. If the Secretary purchases more than $300 million in troubled assets from an institution, the institution must adopt restrictions on executive pay and golden parachutes for any new senior executives it hires. The legislation also restricts the amount of executive compensation participating institutions can deduct for tax purposes. While this may make us feel good, these provisions will likely limit the number of institutions that utilize the program. Not to mention that the compensation restrictions are prospective. In other words, the people who created this mess get to walk away with cash in hand, and the people hired to clean it up get penalized. This will no doubt undermine their efforts to resolve their financial problems by hindering their ability to hire new management Upon enactment of the legislation, the Treasury Secretary is authorized to purchase up to $250 billion in troubled assets. This purchase authority can be increased by another $100 billion if the President certifies that such additional authority is needed. The Secretary's authority can be, and likely will be, increased to $700 billion if the President certifies the need and Congress does not enact a joint resolution of disapproval. It is extremely difficult to obtain the two-thirds votes in both the House and Senate to override a veto. Therefore, for all intents and purposes, this distribution system is a mirage. It does not effectively limit the Treasury Secretary's ability to spend $700 billion. The bill would establish a Financial Stability Oversight Board to review and make recommendations on the Secretary's operation of the program. The oversight board is fatally flawed. First, the Secretary of the Treasury is one of its members. This means that the Treasury Secretary is reviewing his own actions. Second, the other members of the board include the Chairman of the Fed, the Director of the Federal Home Finance Agency, the Chairman of the SEC, and the Secretary of Housing and Urban Development. I think there is a constitutional question about whether a Secretary can have his actions reviewed by any person other than the President. Even if the board is constitutional, why is the Chair of the FDIC not a member? After all, the FDIC has the most experience of any Federal agency in buying and selling bank assets. It also is concerned about resolving bank problems with the least cost to the taxpayers. Regardless of who sits on the board, we will be setting a bad precedent by having heads of agencies oversee our Cabinet Secretaries. Finally, the oversight board's authorities are not well defined, so it is not clear what happens if the oversight board disagrees with the Treasury Secretary's actions. Can it prevent him from acting? Will disagreements result in litigation? Such bureaucratic infighting could very well undermine the effectiveness of the program, to the extent it can be effective at all. The bill also establishes a Congressional Oversight Panel, whose members will be selected by the leaders of the House and Senate. The panel is charged with providing reports on the program, the effectiveness of foreclosure mitigation efforts, and the state of our financial regulatory system. This is work the Senate Banking Committee and House Financial Services Committee should be doing. The bill also provides for oversight of the program by the Comptroller General, establishes an Office of the Special Inspector General for the program, and subjects the Secretary's actions to judicial review. While I think it is important to oversee this new entity's activities, this hodgepodge of authority is likely to hamper the program's effectiveness as it struggles to satisfy redundant and time- consuming requests for information. These oversight bodies might not check the Secretary's authority, but they will ensure that this program generates lots of paper. More importantly, they do nothing to address the fundamental flaws with this plan. The Secretary is required to issue regulations to address conflicts of interest. Interestingly, the Secretary may start buying assets before these rules are put into place. This is a loophole that could have serious long-term consequences for the program. The bill does not require that taxpayer losses be repaid by its beneficiaries. It only directs the President to present a legislative proposal to recoup such losses from the financial services industry. This is something that the President could do even without this legislation. Furthermore, there is no guarantee that the beneficiaries of the program will pay. Indeed, it is likely that companies that did not participate in the program would end up covering its costs. The bill would grant the SEC the authority to suspend mark-to-market accounting, establishing a dangerous precedent that could lead to the politicization of our accounting standards, something I have fought for years. The newest addition to the bill is a precipitous increase in the deposit insurance amount from $100,000 to $250,000. We are about to more than double the exposure of the already depleted deposit insurance fund, and by extension, the American taxpayer, on a whim. I will remind my colleagues that the track record for overnight increases in deposit insurance is not pretty. In 1980, Congress increased deposit insurance coverage for all accounts from $40,000 to $100,000 without the benefit of hearings or open discussion. At that time, proponents argued such a change was necessary to stabilize the banking industry. What followed was a massive bailout of the savings and loan industry to the tune of well over $100 billion. This time around, we are proposing a 150 percent increase when the deposit insurance fund is already stressed and in need of recapitalization. At a time the FDIC's problem bank list is growing and more failures are anticipated, this higher deposit insurance coverage will increase the FDIC's expected payments for failed insured depositories. Those costs, which would ordinarily be passed on to the banking system in the form of higher premiums, will instead be placed directly on taxpayers. Let's also be realistic about this. To the extent this measure is intended to address the concerns of those who handle large transaction accounts, such as corporate treasury deposits, those people are not going to be comforted by additional coverage levels. If they believe a bank is in trouble, they will withdraw their money because deposit insurance does not increase confidence in a failing institution. Let's also be clear about what this means for taxpayers. If, on the front end, the $700 billion bailout is not enough to shore things up, rest assured, there will now be more insurance on the back end should banks begin to fail. The American taxpayer will pay, both coming and going. The bill does do some good things, however. It permits the Federal Reserve to pay interest on reserves, which will improve its ability to conduct monetary policy and serve as a lender of last resort. The bill does marginally increase the availability of the HOPE for Homeowners program and requires the Secretary to implement a plan to assist homeowners to the extent it acquires mortgages or other assets backed by mortgages. While I generally do not support bailing out corporations or individuals, if we are going to get into the bailout business, then funds should be directed to individuals as well. The provisions in this bill for individual homeowners, however, are inconsequential compared to the $700 billion going to Wall Street. As I said, I am no advocate of bailouts. I voted against the Chrysler bailout. I can not say I would have supported a bailout in this instance, but I can say the chances would have been much greater if the underlying plan had been subjected to greater scrutiny and examination. That said, I agree that we need to do something to address the current liquidity crisis in the marketplace. My greatest concern is that we have not spent any time determining whether we have chosen the best response. There are many well informed people who argue that we have not. In fact, just this morning, a Nobel prize winning economist indicated that using a reverse auction program to buy distressed assets from financial institutions was not going to be enough to ``revive the operations of the banks.'' I am not sure whether he is right or wrong. I am also not certain whether the Secretary is right or wrong. To the extent other options exist, I believe we failed the American people greatly in not examining them. Many around here are finding comfort in the notion that ``something is better than nothing.'' I believe that is a false choice. The choice we faced was between pursuing an informed response or panic. Unfortunately, we chose panic and are now about to spend $700 billion on something we have not examined closely. Yes, in the end, we will have ``done something.'' At the same time, however, we will have done nothing to determine whether it will accomplish anything at all. I yield the floor.

Mr. SHELBY

Mr. SHELBY. Mr. President, today I pay tribute to Bobby Hayes, who has dedicated over 24 years of his life to public service. In October of this year, when Bobby steps down as mayor of the city of Pelham, AL, he will leave behind a legacy of leadership and service to his community. For 24 years, Bobby has served as the mayor of Pelham. Over those years, Bobby has overseen many changes to the city. As a retired field commander of the tactical operations unit of the Birmingham Police Department, it was critical to Bobby that he provide local law enforcement with the tools needed to do their jobs effectively. Bobby successfully expanded the Pelham Police Department, adding a traffic unit, tactical operation unit, school resource officers and installing computers in all patrol cars. It was also under his direction that Pelham erected four new fire stations and a new public safety building to house the police department and the municipal court. During his tenure, Mayor Hayes also was instrumental in the building of the Pelham Civic Complex and Pelham Senior Center. Bobby also ensured that the Pelham sewer system and new sewer plant were completed and increased the city's water supply and storage facilities. A strong supporter of education and academics, Bobby oversaw the expansion and renovation of the Pelham Public Library. Since then, it has become one of only four public libraries in the State the Alabama Library Association recognized for excellence in library service. In 2005, the library became the recipient of prestigious Blue Ribbon Library status. While many people think that the service Bobby contributes each day as mayor of Pelham is enough, he thinks otherwise. An avid leader, Bobby has been involved in many State committees and one national committee. In 2004, he was elected vice-president of the Alabama League of Municipalities and in 2005 he rose to serve as president. Bobby also represents the mayors of the 6th Congressional District to the State of Alabama Housing Finance Authority. Additionally, Bobby has held memberships with organizations such as the Alabama League Committee on State and Federal Legislation, National League of Cities Public Safety and Crime Prevention Policy Committee, the Greater Shelby County Chamber of Commerce, and the Alabama City/ County Management Association. Bobby is married to Judith Lance Hayes. Together, they have three children and nine grandchildren. As Bobby embarks on another phase in his life, he will be remembered for his dedication and many contributions to the city of Pelham's ongoing prosperity and advancement. I wish him much luck in his future endeavors, and I ask this entire Senate to join me in recognizing and honoring the life and career of my good friend Bobby Hayes.

Mr. SHELBY

Mr. SHELBY. Mr. President, I rise to speak in support of the final passage of H.R. 3221, the legislation before us Senator Dodd and others have been talking about. This legislation contains numerous provisions that address a wide variety of issues associated with the housing crisis. Many of them, in fact, were previously considered and passed by the Senate in earlier versions of this bill right here on the floor. I wish to highlight a few of these important provisions now. As the Presiding Officer well knows, because he is an important player in this and a very important member of the Banking Committee, this final package contains the same mortgage refinance program included in the earlier bills. This is a temporary, voluntary program within the Federal Housing Administration to back FHA-insured mortgages to distressed borrowers. It requires both mortgage lenders and borrowers to give up some of their financial interest in order to participate. The mortgage lender must agree to reduce the principal balance of the loan, which we also call a ``haircut.'' The loan refinancing arrangement must also bring the loan-to-value, LTV, ratio on the new loan to no greater than 90 percent of the property's current appraised value. Borrowers must accept an equity-sharing requirement and forgo a percentage of any future profits on the sale of their homes. While I would prefer a completely free market solution, at least this program is designed to keep the taxpayer from bearing the cost, something I fought hard for in the Banking Committee. We have included a separate funding stream that carries on in perpetuity to cover any costs that may arise. This package also includes measures which modernize the FHA program. But by streamlining and expanding it, we hope the program can make safe, fixed-rate mortgages more readily available to home buyers in the United States. The legislation also includes a first-time home buyer tax credit of $7,500. I believe this should serve as an additional incentive to potential first-time buyers who may be waiting to purchase a home. The tax credit, combined with the greater availability of sustainable mortgages, should encourage buyers and help invigorate the housing market. While I support this bill, there are a number of provisions in it with which I am very concerned. If it had been my decision alone, I would not have included them. While crafting legislation requires a great deal of give and take, one thing we should not compromise is our obligation to conduct continuing oversight of the programs we enact. Our responsibility to the taxpayers requires that we continue to closely track the funds we are providing. We should not tolerate the waste or misuse of a single tax dollar. It is my hope that my friends who demanded additional spending are as enthusiastic about accounting for tax dollars as they are about spending them. The bill coming back to us from the House does contain a set of entirely new and significant provisions. These provisions were added at the request of Treasury Secretary Paulson, who determined that such measures were needed immediately as a result of the rapidly deteriorating financial condition of Fannie Mae and Freddie Mac. The legislation provides, as the Presiding Officer knows, the Secretary with temporary authority to purchase debt or equity of the GSEs when he, the Secretary, determines that such action is required to stabilize the financial system, protect taxpayers, and prevent disruptions to the mortgage markets. I recognize the unprecedented nature of the authority this legislation provides to the Secretary of the Treasury. It is not something I agreed to without a great deal of consideration. In my estimation, however, the risks of not providing the authority ultimately outweigh the risks of extending it. I said recently I feared we were sitting on a financial powder keg. I think a lot of people realize that. Fannie Mae and Freddie Mac, independently and together, represent considerable risks to the financial system. They each hold portfolios in excess of $700 billion. They each guarantee more than $2.5 trillion in mortgages. Their debt is held as regulatory capital by hundreds, if not thousands, of American financial institutions. They serve as counterparties on derivatives contracts with hundreds of firms, located domestically and abroad, in amounts in the trillions of dollars. For years, I have argued on the Banking Committee that these entities, due to their size and their reach in the financial markets, pose a risk to the global financial system. I have also argued that such systemic risk requires the appropriate regulatory framework to prevent total financial calamity should one of the firms face a crisis. Unfortunately, over the years, my calls for regulatory change were not only unheeded but were rebuffed. Consequently, we were denied the chance to put a strong regulator in place when it could have made a difference. But we are where we are today. What has happened in the meantime seems to be the inevitable result of our failure to act. Indeed, when it became clear that both of the GSEs were on dangerous financial ground, it was no surprise to me that the Secretary asked for such a substantial grant of power and authority. Entities of such size and risk can only be helped by the commitment of a massive amount of resources. Upon the passage of this bill, such resources will be available, if necessary. I hope they will not be necessary. It is unfortunate it took the near collapse of Fannie Mae and Freddie Mac to convince a number of my colleagues that these entities do indeed pose a systemic risk to the U.S. and global economies. Nevertheless, I am pleased this legislation now acknowledges and addresses that reality in statute by giving the Federal Reserve a role in advising the new regulator on risks to our financial system. Although the Fed's role, as the Presiding Officer knows, is temporary, it is now well established that the systemic risks the GSEs pose are permanent. That debate is basically over. The only question now is to whom the Congress assigns that responsibility in 18 months. Since beginning the process of developing this legislation, I have believed the most important aspect of the bill is that it establishes a strong independent regulator for the GSEs. Intervening events have further confirmed my belief. We have provided this new regulator with enhanced powers and additional authority so it has the tools necessary to ensure the GSEs are properly regulated. In doing so, I believe we are taking a very important step to prevent a repeat of the crises that enveloped Fannie Mae and Freddie Mac. We find ourselves at the end of a long legislative road. The time for the debate has ended, and it is now time to vote.

Mr. SHELBY. Mr. President, I will yield it back.

Mr. SHELBY

Mr. SHELBY. Madam President, I rise today to pay tribute to my honorable colleague, Senator Jesse Helms. North Carolina's longest serving popularly elected Senator, Jesse was a good friend and a true conservative. I join the entire Nation in mourning his passing. Jesse was born in Monroe, NC on October 18, 1921. He attended Wingate University and Wake Forest University and had a successful career in newspapers, first as a sports reporter for The Raleigh Times and later as the paper's city news editor. He also served as a recruiter for the U.S. Navy during World War II and worked in radio and television. In the 1950s, Helms began to pursue his interest in politics, working on Willis Smith's U.S. Senate campaign and later in his Senate office. Helms also worked on Senator Richard Russell's Presidential campaign and I. Beverly Lake, Sr.'s gubernatorial campaign. After these efforts, Jesse went back to journalism serving as the Capitol Broadcasting Company's executive vice president, vice chairman of the board and assistant chief executive officer. From these positions, Jesse gained local celebrity as a conservative commentator on the Raleigh-based television station. His notoriety in the area led to a 4-year position on the Raleigh City Council. Jesse remained at the Capitol Broadcasting Company until 1972, when he became the first Republican elected to the Senate from North Carolina in the 20th century. Jesse served North Carolina well as a chairman of both the Agriculture and Foreign Relations Committees. While in the Senate, Jesse was a conservative leader who worked tirelessly for small government, sound foreign policy and strong communities. After serving five terms in the U.S. Senate, Jesse retired and returned to North Carolina, where he wrote and published his memoir, Here's Where I Stand. He also continued his work with the Jesse Helms Center, a nonprofit organization started in 1987 to promote the principles Jesse felt so strongly about--democracy, free enterprise and strong values. In my time with Jesse in the Senate, I knew him to be honest, hardworking and committed to the people of North Carolina and this Nation. It is fitting that he passed away on Independence Day, as Jesse was certainly an independent man who loved this country and the values for which it stands. Jesse is loved and will be missed by his wife of 66 years, Dorothy; his son Charles; his two daughters, Jane and Nancy; and seven grandchildren. He was an inspiration to many and will be remembered for his dedication and many contributions to North Carolina and this Nation. I ask the entire Senate to join me in recognizing and honoring the life of Jesse Helms.

Mr. SHELBY

Mr. SHELBY. Mr. President, we are nearing the end of a long debate in the Senate dealing with what some people call the housing bill, but as we know, it is more than housing. One of the big titles in it deals with the reform of the government-sponsored enterprises--GSEs commonly known as Fannie Mae and Freddie Mac, as well as the Federal Home Loan Bank Board. We know that we are in a housing crisis in this country. We have a lot more houses than we probably need right now, and we have a lot of people who are going to be facing foreclosure. So, working together with Senator Dodd and our staffs, we have tried to come up with a plan to give thousands of people an opportunity for some relief. It is not a Government bailout. It is not taxpayers' money. It gives them an opportunity--assuming a lender is about to foreclose on someone--to get together with someone else who has borrowed money and say: Look, if you can get this refinanced through the FHA modernization plan, if we can do that and we can cut down on the value of the mortgage--take a haircut, so to speak--this is better than a foreclosure. Lenders know the worst thing in the world for them is foreclosure. Borrowers know that too, because it is a dangerous game people play. Going back to the Fannie Mae and Freddie Mac situation, we know they play a huge role--a central role--in our housing, but we also know that together they owe a little over $5 trillion; $5 trillion in debt, and they are thinly capitalized because they are government-sponsored enterprises. They have the implicit guarantee of the taxpayer--the U.S. Government, basically. I have no reason to believe we would let them go under because there is a lot at stake. The way to keep them from getting in worse financial shape is to create a strong regulator that will monitor them closer than they have been in the past to make sure they have adequate capital. With Senator Dodd's 28 years and my 22 years on the Banking Committee, we have 50 years. In our combined 50 years on the Banking Committee, we have seen financial debacles. We have seen good times and bad times. What we are trying to do is prevent as many headaches and hardships as we can, not only to homeowners but ultimately to the American people by reforming GSEs. I hope this is a big first step today. I wish to take a minute to commend my colleague, Senator Dodd, chairman of the Banking Committee. As I enjoyed my 4 years serving as chairman, I also enjoy working with Senator Dodd and his staff. I wish to commend his staff as well as my staff, our Republican staff on the Banking Committee, including Bill Duhnke, Mark Oesterle and others, for all the work they have done here, night and day, and it is not over yet. I yield the floor.

Mr. SHELBY

Mr. SHELBY. Madam President, I rise to engage Senator Dodd in a colloquy discussing the amendment offered by Senator Dole concerning appraisal standards. I would like to acknowledge the distinguished Senator from North Carolina for her efforts in crafting this amendment. In December of last year, Attorney General Cuomo of New York, along with Fannie Mae, Freddie Mac and OFHEO entered into an agreement to create a mortgage appraiser code of conduct. I applaud the work of the attorney general of New York for being proactive in trying to come up with a code of conduct in order to deal with some of the problems in the mortgage appraisal process. While the ``code of conduct'' moves things in a positive direction, Fannie Mae and Freddie Mac are secondary market players, and the attorney general of New York has authority to deal with the conduct that touches upon the State of New York. In order to fully address the issue and create a unified standard affecting all mortgage originators, there must be a process involving all of the appropriate regulatory authorities including the Federal banking regulators who participate in the congressionally authorized Federal Financial Institutions Examination Counsel, FFIEC, subcommittee on appraisals. This would also provide regulated institutions with adequate opportunity to participate in the process. The National Bank Act authorizes national banks to engage in mortgage lending, subject to OCC regulation. Since the early 1990s, each of the Federal banking regulators has had standards in place that deal with the conduct of mortgage appraisers. These standards were put in place to address many of the safety and soundness concerns that we are grappling with today. While I recognize the need to update and strengthen these standards, I believe that we need to be mindful of that structure, and rely upon it as part of the effort to reform the appraisal process. The appraisal is a key component in ensuring sound underwriting both for banks and the consumer. I believe that the key concept of appraisal independence is laudable and although incorporated into Federal banking regulation, perhaps this construct needs to be strengthened. Our goal should be to ensure that a standard exists that avoids inconsistencies, provides stronger consumer protection, and protects the safety and soundness of lending institutions. I believe that as a wake-up call to the regulators that their standards must be revamped and their enforcement stepped up.

Mr. SHELBY

Mr. SHELBY. Mr. President, I object.

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

Mr. SHELBY. I ask unanimous consent that the time be equally divided, charged against each side equally.

Mr. SHELBY. Mr. President, I will suggest the absence of a quorum.

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

Mr. SHELBY. We are that close to passing a meaningful piece of legislation. We would like to pass it. We would like the House to pick it up quickly--either agree to it, amend it, or whatever, and get it to the President. The sooner, the better. This is not a perfect piece of legislation, but overall it has a lot of good things in it. I certainly urge my colleagues to support it. I yield the floor.

Mr. SHELBY. Mr. President, I want to pick up on a few things that the Senator from Connecticut has been talking about. We got a vote a few minutes ago, I believe 83 to 9, on cloture on this bill. Last week we had three or four well-debated amendments offered by various Senators, and they were overwhelmingly rejected, huge votes. Where are we now? We have worked on this a long time. We have GSE reform in here, which I have worked on for 5 years on the Banking Committee, as Senator Dodd recalled, and the Presiding Officer, a member of the Banking Committee and very involved in the Banking Committee. This is a very complicated piece of legislation in this title dealing with GSEs, which we have come a long way with. Everybody here knows, I believe on both sides of the aisle, that the GSEs provide a lot of the mortgage funds, most of them today. But they do need to be well regulated. They also need to be well capitalized, considering the risk and so forth, the implicit guarantee of the Federal Government. I have been told recently that their debt, that Freddie Mac and Fannie Mae debt, exceeds the debt of the United Kingdom and France together. I do not know if that is exactly right. But if it is, that is over $5 trillion. So we need to get this done. We need to make sure the GSEs survive. We want to make sure GSEs are properly regulated, and we can do it here. Another part of the title of this bill is dealing with housing, as the Presiding Officer knows. This is going to give a lot of people in America an opportunity to refinance some mortgages. It will not save everybody. It should not save everybody. But there is no specific bailout for any specific mortgage company or banks, as somebody alluded to last week--none of that. The chairman of the committee, the Presiding Officer, as a member of the committee, and I, as a Senator, we would not have that. We would not vote our support for anything like this. But we will create conditions to let people refinance their mortgages, assuming they can work this out, assuming the lender would rather take a haircut--you know, less money than a foreclosure. The last thing a lender as a rule wants is a foreclosure because the house is vacant in the neighborhood. Senator Dodd was talking about that. We do not need four or five vacancies in the neighborhood and the house run down, weeds growing instead of the lawn trimmed. Everybody knows what that does to the value of their neighbors' property. Housing is important. What we are trying to do--and one can see the votes we have been getting--is fashion something that will give a lot of people a better opportunity to finance their home, as well as to regulate the GSEs in a meaningful way. Most of the Members of the Senate know that. If somebody has an amendment, they ought to come down here. I know we can debate this for 30 hours under the rules--I believe that is right-- after cloture.

Mr. SHELBY. I yield the Senator from Idaho 10 minutes.

Mr. SHELBY

Mr. SHELBY. Mr. President, today I wish to recognize and pay tribute to LTC Craig M. Greene, deputy chief, Army Senate Liaison Division, Office of the Chief of Legislative Liaison, who will retire September 1, 2008. I wish to commend and congratulate Lieutenant Colonel Craig Greene upon his retirement. Lieutenant Colonel Greene's distinguished career as an infantry officer embodies all of the Army's values of loyalty, duty, respect, honor, integrity, and personal courage and spans 20 years, during which he has distinguished himself as both a soldier and leader. Upon graduating from the University of Massachusetts, Lieutenant Colonel Greene served as an infantry officer in command and staff positions in a number of infantry units. Prior to Lieutenant Colonel Greene's assignment to the Office of Chief of Legislative Liaison, he was assigned to the 25th Infantry Division, Light, Schofield Barracks, HI, from 2001 to 2003. His experience in the Army's Officer Personnel Management Command led to Lieutenant Colonel Greene being selected to serve as the brigade S-1 for the 2nd Brigade ``Warriors'' and the secretary to the General Staff for the Commanding General. The consummate professional, Lieutenant Colonel Greene revised internal systems to streamline information flow and the decisionmaking process to include instituting a ``Battle Rhythm'' for the division staff eliminating redundant meetings and events. In his more recent position as a congressional liaison, I have come to know and respect Lieutenant Colonel Greene. A natural at building and maintaining relationships with Members of Congress and their staffs, Lieutenant Colonel Greene was invaluable as the Army faced many challenges associated with its budget and real-world combat operations in the global war on terror. Members knew they could count on Lieutenant Colonel Greene for his counsel, professional advice, and unwavering integrity. While assigned to the Office of Congressional Legislative Liaison, Lieutenant Colonel Greene prepared members of the Army staff for over 20 hearings and orchestrated over 150 congressional engagements to ensure Congress understood the Army programs and budget requirements to grow and transform the Army. Lieutenant Colonel Greene escorted over 50 congressional delegations worldwide. His expertise concerning congressional affairs, his strategic, operational, and tactical knowledge of the Army, combined with his keen intuition and ability to develop key relationships have been instrumental in enabling the chief of legislative liaison and the Army to meet the Army's legislative objectives. Lieutenant Colonel Greene has escorted 12 delegations to Iraq and Afghanistan, in support of Operation Iraqi Freedom and Operation Enduring Freedom. I was privileged to have Lieutenant Colonel Greene as an escort on several of my own trips. A tireless worker, he coordinated with all of the relevant agencies and individuals to ensure my overseas travel was always successful. I am extremely grateful for the service he provided me and my staff during those trips. During his distinguished Army career, Lieutenant Colonel Greene has been awarded numerous accolades, including the Defense Meritorious Medal, four Meritorious Service Medals, five Army Accommodation Medals, two Army Achievement Medals, the Expert Infantry Badge, the Ranger Tab, and Parachutist and Air Assault Badge. Lieutenant Colonel Greene's faithful service, leadership, loyalty, and dedication to duty uphold the highest traditions of military service, and he has repeatedly stood for the defense of this Nation. His devotion to the defense of liberty epitomizes the words soldier, patriot and American. I hope my colleagues will join me in thanking Lieutenant Colonel Craig M. Greene for his service to our Nation and the U.S. Army. I thank his wife, Michelle, and his sons, Jackson and Austin, for their support while he fulfilled this essential duty to our country. I personally wish the Greene family all the best as they celebrate Lieutenant Colonel Greene's richly deserved retirement.

Mr. SHELBY

Mr. SHELBY. Madam President, I commend the chairman of the Banking Committee, Senator Dodd, for his work on this package of legislation. It is a package. It is dealing with the reform of the government- sponsored enterprises, GSEs, which desperately need to have a strong regulator because they play such a huge role, probably the primary role by a long shot right now, in our housing industry. They need to be properly regulated because they are a government-sponsored enterprise, and that is part of the legislation I have pushed. Senator Dodd and I have worked together. He is pushing the housing legislation, but I agree with him. If there were any inkling of a bailout for anybody here, we wouldn't be a part of it in any way, and no one would in the Senate. So that is a red herring. But this will give some hope and opportunity for some people to probably save their homes who otherwise wouldn't be able to. We need to pass this legislation now. If we could get this legislation to the President's desk, and he would sign it, which I hope he would by the 4th of July, by the end of next week, this would be a significant feat on our part. I hope we can do it. I also want to take a moment, as Senator Dodd did, and commend other Senators for their work. Senator Isakson knows a lot about housing. He grew up in housing. He has been very successful at it, and he brings that experience and knowledge to this body in the Senate. The housing tax credit, not to bail out anybody but to help people save their homes, was I believe originated by him. He is pushing this provision, and we commend him for helping us on this. I commend my friend and colleague from New Hampshire, Senator Judd Gregg, the former chairman of the Budget Committee, now the ranking member. He knows a lot about all the problems in this country. He is very insightful. He sees this legislation, overall, as a good package and a good piece of legislation. I hope we will be able today and tomorrow to pass this legislation, if the Senate is willing, and go to the next step, because there are a lot of people who will possibly be able to save their homes because of this. Will this save everything in America? No. But it will be a good first step and it will be profound, meaningful legislation, and so I commend it to the Senate this afternoon. Madam President, I yield the floor, and I suggest the absence of a quorum.

Mr. SHELBY. Madam President, I regret that I, too, must oppose the amendment offered by the Senator from Missouri, amendment No. 4986. Senator Bond's amendment would specifically undermine the goal of protecting the American taxpayer from the costs of the HOPE Program. I have often said--and I will repeat once again--that we should do whatever we can to help people stay in their homes short of sticking taxpayers with the tab. The Banking Committee has worked long and hard for months on this issue and has found a way to accommodate a wide range of goals and concerns with this legislation. The affordable housing fund and the funding mechanism--which is important here--for the HOPE Program are two of the most critical elements that allowed us to reach a bipartisan agreement. Eliminating either one of these now would simply unwind the entire bill, would destroy the whole bill, and neither I nor Senator Dodd nor a lot of our colleagues on both sides of the aisle can support that. Therefore, I urge my colleagues to join us in opposing the first Bond amendment. Amendment No. 4985 Madam President, I would like to speak for a minute on the Bond amendment No. 4985, the second amendment. While I am sympathetic to and share many of Senator Bond's concerns regarding FHA's longtime management problems and resource constraints, I cannot support this amendment. The proposed HOPE for Homeowners Program establishes a new board to oversee the implementation of this program. Included on this board, in addition to HUD, are the FDIC, the Federal Reserve, and the Treasury Department. It is our intention that the expertise and experience of this board will compensate for FHA's longstanding management problems. Additionally, the bill would provide--this is important--at no cost to the taxpayer, funding for additional resources, particularly in the form of increased staff, to manage and implement the proposed HOPE Program. While I agree with Senator Bond that depending solely on existing FHA resources, the HOPE Program would be unworkable, I believe the increased resources and board oversight provided in this legislation sufficiently address those concerns. I encourage my colleagues to oppose this second Bond amendment, too. Mr. SANDERS addressed the Chair.

Mr. SHELBY. I yield 1 minute, at this point, to the Senator from Georgia, Mr. Isakson.

Mr. SHELBY. Madam President, I will yield 2 minutes to the Senator from Tennessee.

Mr. SHELBY. Madam President, what is the pending business?

Mr. SHELBY. I yield back the remainder of my time. Amendment No. 4986, as Modified