Brad Sherman

Mr. SHERMAN

Mr. SHERMAN. I yield the gentleman an additional 30 seconds.

Mr. SHERMAN. I yield 1\1/2\ minutes to the gentleman from California (Mr. Gary G. Miller).

Mr. SHERMAN. Mr. Chairman, I rise in opposition to the amendment.

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I rise to comment on the regulatory reform bill pending before the Senate. Senator Dodd has brought a bill that will provide for consumer protection, higher capital requirements, and the regulation of derivatives. We need all that. But we have to ask the question, does the Senate draft increase or decrease the statutory authority of the executive branch to bail out Wall Street giants and their creditors and counterparties? Unfortunately, the current draft of the Senate bill increases bailout authority. It provides, first, in Section 210, for the use of taxpayer money when an insolvent institution is to be liquidated in order to protect the counterparties and the creditors of that institution. Now, Senator McConnell has gone even further in the pro-bailout direction. He has criticized the fact that the Senate bill has a $50 billion advance fund collected from Wall Street which would be used before any amounts would be borrowed from the taxpayer. So Mr. McConnell says do away with the fund but he barely comments on the taxpayer borrowing. The results will be that the Federal Government, when it liquidates one of these Wall Street giants, will be borrowing the first dollar from the taxpayer. We certainly don't need a circumstance where we are lending money in order to bail out the creditors and counterparties of giant and improvident financial institutions and we haven't even collected any of that money in advance. The House bill provides strict dollar limits on the amount that can be borrowed from the Treasury and sunsets this borrowing authority in 2013. Section 1155 of the Senate bill allows the executive branch to put unlimited taxpayer dollars at risk in order to guarantee the obligations of solvent banks. Now, the Senate bill does say that you can have this resolution of disapproval come before the Congress, but a resolution of disapproval is a phony device designed to give the illusion of congressional control. What it says is that in order to stop a hundred billion dollar transfer of our taxpayer money to Wall Street, you would need a vote in the House and a vote in the Senate; then it would be vetoed by the executive branch; then even if you had an overwhelming vote in the House, as long as 34 Senators were in favor of the bailout, the bailout would go forward. A resolution of disapproval is the illusion of congressional control. Instead, we should follow the House approach by putting a dollar limit on this emergency financial stabilization, and we should sunset all authority under it in the year 2013. Just as important is the existing Section 13-3 of the Federal Reserve Act. Since 1935, the Federal Reserve has had the power, and this is enormous, to lend any amount of money to just about anybody so long as they think they have adequate security. Now, the Fed has already used this statutory authority to lend upwards of $2 trillion. So if we're against bailouts, we've got to ask, what limits does the Senate bill place on Section 13-3 authority? It provides only some minimal limits, requiring that that authority be used not to bail out just one company on Wall Street, but to be systemwide. Instead, the Senate can learn from the House bill to put dollar restrictions on this authority, and to provide that the security must be so good that we have a 99 percent likelihood of repayment. Even better yet, we ought to simply repeal Section 13-3. Finally, ``too big to fail'' is too big to exist. In the House bill, we authorize the regulators to break up institutions that are too big to fail. The Senate, I believe, has basically ignored this House provision. They should not only embrace it, they should go much further. They should require the break-up of any institutions whose liabilities to American persons exceeds 1 percent of the U.S. GDP. There is no reason that a bank has to be over $140 billion in size. And if they are, they ought to be at least as smart as an amoeba. When an amoeba gets too big, it divides itself into two separate cells. Banks can do the same. In conclusion, the people of this country want to give the executive branch the power to nail Wall Street firms, to require regulations of derivatives, higher capital requirements, and to liquidate them when they get themselves into trouble and pose a risk to the entire economy. But the American people don't want to bail. So let's provide nail authority without bail authority.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, on Tuesday, April 13th and Wednesday, April 14th I was unavoidably absent from the House Chamber. Had I been present, I would have voted ``yea'' on rollcall votes 196, 197, 198, 199, 200, 201, 202 and 203.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, on Monday, February 22 I was unavoidably absent from the House Chamber. Had I been present, I would have voted ``yea'' on rollcall votes 49 and 50.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, I have cosponsored the Brewers Excise and Economic Relief Act of 2009, H.R. 836. I have been informed that it is highly unlikely that this bill will reach the floor of the House. Accordingly, it is highly unlikely that we will act to reduce the tax on beer. I also have been informed that co-sponsorship of the Brewers Excise and Economic Relief Act is the best way to demonstrate to congressional leadership that there is not support in the House for any increase on the tax on beer. I am told that this is the intended message of some, and perhaps most, of the 242 cosponsors of the bill. I am quite mindful of the large national debt. Still, I wish to be counted among those who are opposed to an increase in the tax on beer.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, I have cosponsored the Stop Any TARP Extension Act of 2009. The position of the Treasury Department--that it is free to reuse any repaid TARP funds--is entirely contrary to the law. Due to the Department's unwillingness to adhere to the statutory language of the Emergency Economic Stabilization Act of 2008, it is necessary to terminate that Act. My office has inquired with the Treasury Department as to whether it possesses any legal opinion justifying the recycling of funds repaid by the banks. It should be noted that the Department has hundreds of lawyers and rarely does anything without a legal opinion, certainly not anything involving hundreds of billions of dollars. The Treasury Department refused to provide any legal opinion to Congress, implying that this is a case where he cannot find even one Department lawyer to reach the conclusion the Department would prefer. Terminating TARP today will immediately return more than $300 billion to the general treasury. This will give us the fiscal capacity to take the actions necessary to fight the great recession and get Americans back to work. I voted to enact the American Recovery and Reinvestment Act of 2009 in February and would be willing to support well designed job-creation programs again today. A disadvantage of keeping TARP alive is that the administration may select job-creating programs based upon whether they somehow fit a contrived and expanded interpretation of the TARP statute, rather than whether they constitute the best job creation strategy. Once the TARP funds are returned to the treasury, Congress should immediately consider job-creating and recession-fighting bills.

Mr. SHERMAN

Mr. SHERMAN. As one of the six original cosponsors of this legislation, I rise in support. The gentleman from Texas (Mr. Paul) attacks the whole concept of the use of sanctions saying that American sanctions against Japan led to our involvement in World War II. If you think that America should have remained neutral in World War II, you should vote with the gentleman from Texas (Mr. Paul). Iran has been found to have violated the nonproliferation treaty and its commitments under that treaty by the United Nations Security Council with the votes of Russia and China, who also voted to impose some limited sanctions against Iran. My district contains, I believe, more Iranian Americans than any other in the country, and let me tell you that those who support the students and the effort for democracy in their homeland support the idea of sanctions. This bill is but one step that we need to take in ratcheting the economic power on the regime in Tehran. This bill amends the Iran Sanctions Act. It is important that that act be enforced both before and after we adopt these amendments.

Mr. SHERMAN

Mr. SHERMAN. Madam Chair, I would like to speak about a provision I authored that was included in the manager's amendment. The provision provides that a Nationally Recognized Statistical Rating Organization shall be liable if it is grossly negligent in determining a credit rating. My intention in drafting this provision was only to impose potential liability on ratings provided pursuant to a contract with the issuer of the debt. Nationally Recognized Statistical Rating Organizations that provide ratings solely for the purpose of journalism, without being paid by the issuer, do not face potential liability under this provision.

Mr. SHERMAN

Mr. SHERMAN. I reserve the right to close.

Mr. SHERMAN. Does the gentleman from New Jersey have only one more speaker? Then at this point I'll yield 2 minutes to the gentleman from Massachusetts (Mr. Capuano).

Mr. SHERMAN. First, let's set the record straight. Republicans are coming to this floor calling this a bailout bill. They're quoting my statement that the original draft of the bill was TARP on steroids. The fact is this bill now reins in executive branch bailout authority, and the Republican substitute is the thing to vote for if you want to be a bailout nation. Second, I want to thank the Chair of the committee for including my revisions of section 1109 in the manager's amendment. Now as to this amendment. The bill's language is designed to hold credit rating agencies accountable. These are the agencies that gave AAA to Alt-A; that is to say, they gave the highest ratings to bad mortgage bonds, and nothing did more to put us in this recession than the trillions of dollars that investors bet on these bad mortgages, only to see the whole thing unwind. Now we provide that they will be held accountable. The SEC has taken no enforcement action. All of the incentives in the present system push in the wrong direction. The way a credit rating agency gets business is to get a reputation for being a liberal grader, so that one issuer after another will hire them to give the high rating to their bad bonds. It's like the umpire being selected by the home team. Instead, we need to put pressure on the other side and say that if you are grossly negligent in assigning a high rating to bad bonds that hurt investors and also hurt the entire economy, you will be held accountable. Now is the time to change the system, to make sure that the economic pressures on credit rating agencies are not all on the side of a liberal rating. We need to make it clear to credit rating agencies if you give AAA to Alt-A, you'll pay.

Mr. SHERMAN. I now yield to the gentleman from Pennsylvania (Mr. Kanjorski), the Chair of the relevant subcommittee, for 1 minute.

Mr. SHERMAN. Madam Chair, I rise to claim the time in opposition.

Mr. SHERMAN

Mr. SHERMAN. The gentleman from Texas seems quite aware of the statement I made about the first draft of this bill that was submitted by the Treasury Department. I referred to that draft as ``TARP on steroids.'' Unfortunately, the gentleman from Texas seems blissfully unaware of all the changes that were made to the bill in many days of markup. On balance, today, this bill before this House reduces executive power to bail out Wall Street. Yes, the bill does include some additional authority to the executive branch under sections 1109 and 1604. But pursuant to amendments that I offered, these additional powers are limited in amount and are sunsetted in the year 2013. So additional power is limited and sunsetted. What this bill does, however, is it deals with the existing enormous bailout powers that exist under present statute. It suspends 12 U.S.C. 1823, of present statute, which allows, or has been interpreted to allow, the FDIC to make unlimited loan guarantees of more than $300 billion. This bill reins in section 13-3 of the Federal Reserve Act, which allows the Fed to make loans of any amount to anybody they want to under virtually any circumstances. They have already used this to the tune of $3 trillion. A vote against this bill is a vote for unchecked power in the Fed. It is a vote not only to preserve the provision that allows them to loan $3 trillion, but that same provision would allow them to loan $30 trillion. Only by voting for this bill can we rein in the Fed and their powers under section 13-3. Only by voting for this bill can we audit the Fed pursuant to the amendment drafted by Congressmen Paul and Grayson.

Mr. SHERMAN. Voting against this bill is voting against the unchecked power of the Federal Reserve.

Mr. SHERMAN

Mr. SHERMAN. I have had to sit here and listen as one Republican after another comes down and says that this bill facilitates bailouts. Most of those Republicans have quoted me. I did say that the Treasury draft of this bill submitted last summer was ``TARP on steroids,'' but apparently they didn't notice that the bill changed in committee. In fact, the gentleman from New Jersey came down and said he wants to end TARP--which I voted against twice--and that on a straight party-line vote, the Rules Committee turned down his amendment. I voted for such an amendment in the Financial Services Committee, and last I checked, I was a Democrat. But I want to focus on the issue of bailouts, comparing the bill to the Republican substitute. Now, keep in mind that most of the bailouts we've done have not been through the TARP program, but rather were pursuant to sections of law that existed long ago, including, and especially, 13-3 of the Federal Reserve Act, which was adopted in 1932. It is that one code section alone that has allowed $3 trillion to be spent on what could be called bailouts. So, since the biggest bailouts have come from the Fed, we ought to end secrecy at the Fed. The Democratic bill includes the Ron Paul-Alan Grayson amendment to audit the Fed; for reasons I do not understand, the Republican substitute does not. Their substitute allows the Fed to continue to be exempt from many GAO audits. Now, as I said, the biggest bailouts are under section 13-3 of the Federal Reserve Act. That has been used for $3 trillion, but the Fed could legally use it for $30 trillion. The Republican bill does very little to limit the Fed's power under section 13-3. The Democratic bill includes my amendments to put a dollar limit on the amount that the Fed can obligate and my amendment to require that only the most secure loans are made. For some reason, the Republican bill limits the Fed barely at all. 12 U.S.C. 1823(c)(4)(G)(i) under the Federal Deposit Insurance Act has been used by the FDIC to make loan guarantees of more than $300 billion, and in fact there is no dollar limit on this section. What they've done with $300 billion they could have done with $800 billion. The Democratic bill suspends this broad authority. The Republican bill contains no limits on this authority. So if you want to live in Bailout Nation, then you've got to make sure that the Fed doesn't lose its exemptions from audits.

Mr. SHERMAN. You have to make sure that the Fed's powers under 13-3, which have already been used to the tune of $3 trillion, remain unlimited and could go to $30 trillion. And you have to keep the FDIC with unlimited powers under 12 U.S.C. 1823(c)(4)(G)(i). If you want to live in Bailout Nation, you have to vote for the Republican substitute. If you want to rein in the bailout powers of the executive branch, and if you want to make sure that the Fed is subject to audit, you have to vote for the Democratic bill.

Mr. SHERMAN

Mr. SHERMAN. The ranking member came to the floor and quoted me as describing this bill as ``TARP on steroids.'' That's the phrase I used to describe the original bill submitted to us by the Secretary of the Treasury. This bill is very different. I want to thank Chairman Frank for all the changes we have been able to make and declare that this bill is now a step forward in limiting, on balance, the power of the executive branch to put taxpayer money at risk or to bail out private institutions. The bill does include two provisions that those concerned with bailouts might object to, but these provisions are limited as to amount and purpose, and they are sunsetted in 2013. Finally, while taxpayer money may be put at risk initially, ultimately the cost falls on the industry. But you cannot call this bill ``TARP on steroids'' and quote me to that effect without noting the major change this bill now makes in section 13(3) of the Federal Reserve Act. That is the most dangerous provision in the U.S. Code, and this bill is a major step toward limiting that section. Code section 13(3) now allows the Federal Reserve to lend, at times of systemic risk that they declare to be in existence, unlimited amounts to just about anyone on whatever terms the Fed thinks is adequately secured. Unlimited amounts. They've already done about $3 trillion, and under current statute they could do $30 trillion. And the Republican alternative does nothing to limit section 13(3). It leaves the giant freeway of bailouts open forever. In contrast, this bill contains three important limitations. The first was drafted by the chairman, and it says that 13(3) can only be used to put money in the economy in general, not to bail out one or two firms. And I thank the chairman for accepting two of my amendments. One limits section 13(3) to $4 trillion and does not adjust that amount for inflation so that the power of the Fed will decline with inflation over time, which is only fair since it's the Fed that's supposed to be in charge of limiting and eliminating inflation. The second amendment that was accepted was the idea of requiring the highest possible security for amounts of credit extended under 13(3). This bill is a step toward limiting the power of the executive branch to put money, taxpayer money, at risk. It does contain section 1109 and 1604, both of which are, pursuant to an amendment accepted in committee which I authored, sunsetted in 2013. Section 1109 replaces 1823 under current statute, so it doesn't expand bailout authority. In fact, it contrasts it, because it's limited to $500 billion, while 1823, which is suspended by this bill, is an unlimited amount. Section 1109 as it will appear in the manager's amendment requires an advance fee so that taxpayers are compensated for any money put at risk and, finally, any losses to be collected from those companies which participate in the section 1109 loan guarantee program. Section 1604 does provide funds to resolve insolvent institutions, but as the chairman points out, it's a death panel, not a bailout. It's only for institutions that are going to be liquidated.

Mr. SHERMAN. It's limited to $150 billion collected in advance from the same large companies whose creditors could be eligible for relief. And section 1604 is sunsetted in the year 2013. Taken as a whole, this is antibailout legislation and contrasts with the Republican alternative that does nothing to limit section 13(3), which has already been used chiefly under the Bush administration to put over $3 trillion of taxpayer money at risk. It does provide for section 1109 and 1604, but under the bill these are limited in amount and they're temporary in time. And most importantly, it limits section 13(3) three ways: as to dollar amount, as to the purpose that money is put at risk, and, finally, as to the degree of risk which the Fed is able to take. What I said about this bill when it was originally proposed may well have been true. The bill now is a step away from the TARP approach, a step away from bailouts.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, I rise today to honor the life of Amy Elizabeth Corwin, who tragically passed away on July 2, 2009 after a long battle with a brain tumor. Amy served as an intern in my District Office during the summers of 2004 and 2005. Her intellect, warm and engaging personality, and enduring strength have left an indelible impact upon me and my staff. Amy was born on January 26, 1984 to Joel and Linda Corwin of Westlake Village, California. She had one younger sister, Diana Corwin. From an early age, Amy expressed a love of cultures and travel and a keen aptitude for learning foreign languages. She enjoyed learning about history and architecture, attending the theatre, and exploring museums. While a student at Emory University, Amy spent a semester abroad in Salamanca, Spain, where she immersed herself in the local culture. In Salamanca, Amy stayed with a host family who spoke no English, and she took classes given strictly in Spanish that were attended by Spaniards and students from all over the world. Amy would go on to graduate from Emory in 2006 with her Bachelor of Arts degrees in Political Science, Spanish and Portuguese. During her internship, Amy served as an invaluable member of my District Office team. On numerous occasions she effectively assisted my Spanish-speaking constituents. In addition to her constituent-service skills, Amy acted as a mentor to new interns. Her warmth, ability to relate to people, and knowledge of public policy issues were evident. Amy effortlessly and ably engaged in political discussions and it became clear that Amy was indeed wiser than her years. More than anything else, Amy loved spending time with her family and friends. She was a warm and loving daughter, sister, and friend. She was intelligent, compassionate and wanted to find a way to make the world a better place for everyone she encountered. Amy was a terrific athlete and a fierce competitor on the tennis court, and she applied this mentality to all areas of her life. When confronted with a terrible illness, she fought valiantly and she never lost hope that she would beat the disease. Amy was a selfless and caring individual who never wanted to burden others with concerns about her health. She never allowed her illness to change who she was; she remained optimistic and upbeat throughout her life. She wished to be remembered for the person she was, not the illness she endured. Although Amy's years on this planet were short, her life, nevertheless, was rich. And for all those who had the privilege of meeting or knowing Amy, our lives were made richer as a result. I offer my deepest condolences to Joel, Linda, Diana and to the rest of Amy's family and friends. She will be greatly missed.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, I have cosponsored H.R. 3795, the Over- the-Counter Derivatives Market Act of 2009. I believe the bill is a step in the right direction, but I would prefer even greater restrictions on over-the-counter derivatives.

Mr. SHERMAN

Mr. SHERMAN. Madam Speaker, I rise today to recognize the importance and many achievements of credit unions worldwide in celebration of the 61st annual International Credit Union Credit Day. The difference credit unions make in the United States by providing affordable and safe financial services to many Americans of moderate means has been significant and widely recognized. However, the contributions credit unions have made on an international scale are equally notable. Since the mid-1800s, credit unions have established themselves in communities around the world struggling with social dislocation, political unrest and economic depression as a means to promote economic growth and democratic practices at the local level. Today, more than 54,000 credit unions provide financial services to more than 186 million members in 97 nations. Credit unions make a difference on a global scale by providing access to affordable financial services for those who otherwise would have been excluded from the financial sector. Such financial services include the provision of small savings and loans, which enable some of the poorest individuals in the world to start their own microenterprises, improve household stability and stimulate growth in their communities. Credit unions are the largest source of these microfinance services in countries as diverse as Colombia, Kenya, Russia, Mexico, Thailand and Rwanda. Credit unions are also at the forefront of expanding access to finance for people living in rural areas who can't afford the time or money it takes to visit a financial institution. Credit unions are working with the World Council of Credit Unions (WOCCU) to introduce a variety of innovative technology solutions to bank the unbanked in rural areas. In Mexico, credit union officers carry hand-held personal digital assistant (PDA) devices to conduct financial transactions with members in communities located up to 90 minutes from the credit union office. In Kenya, Peru and Mexico, point-of-sale devices enable credit unions to partner with local merchants in rural areas, allowing members to deposit and withdraw money from their credit union accounts. Finally, mobile banking capabilities in Mexico will enable members to check their balances and transfer funds without leaving their homes. In addition, credit unions throughout the world are filling the agricultural lending gap that has kept the vast majority of small farmers stuck in low-production, low-return cycles. In countries such as Peru, Kenya and Colombia, credit unions are taking an integrated, value-chain approach to financing that includes access to agricultural training and markets for farmers to sell their products. As a result, farmers are not only increasing their incomes and producing more food for their families, they are also playing a role in securing their nations' food supply. Credit unions have also contributed to post-conflict rebuilding of societies and economies in war-torn countries. WOCCU has been on the ground in Afghanistan since 2003, working with communities at the grassroots level to form the country's first credit unions and rural financial system. Afghan credit unions are known as ``Islamic investment and finance cooperatives'' in order to comply with Islamic lending practices. They are playing a powerful role in communities, bringing together people from different tribes to work together to finance the individual needs of each other and those of the community through reconstruction projects. In Helmand province, for example, access to credit provides poppy farmers with the opportunity to start a new life by growing alternative crops such as paprika. This will have an impact on the overall security and stability of the region. As democratically owned and operated not-for-profit financial cooperatives, credit unions also contribute to the democratization of societies. The one-member one-vote principle of credit unions is often the first vehicle for local expressions of democratic participation. In many countries, credit unions lead economic democratization, a step closer to political democratization by providing economic security and sustainability and exposing lower-income communities to free-market principles and democratic values that will help eradicate terrorism at its roots. U.S. credit union members, staff and leagues, along with CUNA and the United States government, support the global work of credit unions and WOCCU. Through WOCCU's International Partnerships Program, 25 U.S. credit union leagues are matched with developing credit union movements overseas to encourage the direct transfer of technology, skills and experience among peers across borders. Madam Speaker, I ask you and my other distinguished colleagues to join me in commending the work of credit unions, both domestically and internationally, for providing vital financial services that improve the lives of people demonstrating the greatest need around the world. By providing the world's poor with the most basic financial services, credit unions help expand job opportunities, improve local economies and promote democracy. In short, credit unions offer a sustainable development solution to some of the world's poorest countries, and this is the ``credit union difference.''

Mr. SHERMAN

Mr. SHERMAN. Mr. Speaker, I support the bill. I wish it went a bit further, and I, of course, oppose Mr. Garrett's amendment. First, his amendment significantly weakens the say-on-pay provisions. That's right. It weakens a provision, which, itself, simply provides for nonbinding resolutions; but the core of the Garrett amendment is that it eliminates the provision in the bill which is designed to provide very modest restrictions on some very peculiar and pernicious compensation formulas that have been used on Wall Street. Now let us look at how narrow this provision is. It applies only to financial institutions and then only to those with over $1 billion. It does not prohibit $1 million-dollar-a-month salaries. It does not prohibit $10 million-dollar-a-month salaries. It allows an executive to get a kajillion stock options and another kajillion shares of restricted stock. This bill is not an overall limit on compensation on Wall Street. What it does is it prohibits those compensation formulas that provide an incentive for taking extreme risks, risks that are bad for our economy, risks that are bad for the company. Now, the Group of 30, led by Paul Volcker, found and reported that there are numerous examples of misaligned incentives, of incentives that contribute to instability and to cyclicality in financial markets. The crisis has driven home the importance of aligning compensation practices with the incentives and controls in a firm's risk-management program, aligning pay with long-term shareholder interests rather than with short-term returns that cannot be sustained and which entail greater risk. So this is a provision not designed, not intended to limit the overall financial compensation in financial institutions, not designed to prevent enormous bonuses. But the bonuses must not, by themselves, be designed to undermine the economy or the company. Now, this is a small step that we can take to make sure we don't have another financial meltdown. Let me respond to Mr. Hensarling and others who came to this floor and basically said all we have to do is make sure there are no further bailouts. Well, I opposed the Wall Street bailout, but I'm not going to join with those who say the only problem we had in September of 2008 is that we voted for the bill. We've got to act to prevent the next financial meltdown, and it is not enough to come to this floor and say, Well, it's okay to have another September 2008 as long as we vote against some future bailout bill twice instead of once. The goal is not to defeat the TARP bill. The goal is to prevent the conditions which caused so many to think that it was necessary and for all of us to recognize that we faced a great financial crisis. The way to do that is to vote down this amendment and make sure that some very peculiar, very pernicious incentive formulas are not used to cause those on Wall Street to feel that if they could only take the most enormous risk, they can maximize their compensation.