RESTORING AMERICAN FINANCIAL STABILITY ACT OF 2010


Barbara BoxerU.S. Senator
[D] California, United States

Length: 17 minutes, 58 seconds


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Mrs. BOXER. Mr. President, I thank Senator Dodd for all his work on so many issues. Just the way things worked out, he has been so pivotal in health care reform and now in Wall Street reform. This is an era of reform. My friend should be very proud that he happens to be here at this time, because we can't go back to the days we left. As a reminder, I will show you some of the headlines. It is worth a minute of looking at these headlines. This is taken from 2007 and 2008, some of the headlines we had to face in those times: ``U.S. unemployment rate hits 10.2 percent, highest in 26 years.'' How about this one: ``Nightmare on Wall St.'' ``The bailout to end all bailouts.'' ``Wall Street's latest downfall: Madoff charged with fraud.'' ``Credit crunch continues as lending rates climb.'' ``Jobs, wages nowhere near rock bottom yet.'' ``Where do we go from here?'' ``The Nasdaq in biggest fall since the dot.com crash.'' ``Dow dives 778 points.'' ``U.S. loses 533,000 jobs in biggest drop since 1974.'' We can see the look on this man's face. He is obviously standing in the middle of the New York Stock Exchange. That explains how everybody felt as our constituents lost their wealth. They lost their wealth and with it their confidence in America.

I want to continue with one more chart because all of us want so much to put this behind us. That is what we will do with this bill. But we have to remember. ``Economy in crisis, what now?'' ``U.S. pension insurer lost billions in market.'' ``Housing prices take biggest dive since 1991.'' ``Full of doubts, U.S. shoppers cut spending.'' ``Wall Street employees set to get 145 billion 2009,'' the bonuses during this time. ``How low can they go?'' ``Home prices drop 42%.'' ``Carnage continues: 524,000 jobs lost in December.'' And from the San Jose Mercury News: ``Foreclosure Wave, San Jose Fights to Protect Neighborhoods.'' What we are doing here is so important. I am so proud of the work Senator Dodd did in his committee that has brought us to this point. I am grateful that our Republican friends let this bill move forward. We will have our debates. That is fine. But we can't afford to go back to those old days. Those old days could happen unless we act, as the President has stated.

I want to take the time to thank Senator Dodd in particular for working with us, as well as to thank the administration for working with us, to come up with an amendment which will synthesize exactly what the bill does.

The purpose of this amendment--which is pending at the desk, which I am hopeful we will vote on Tuesday--says in its purpose: ``To prohibit taxpayers from ever having to bail out the financial sector.'' When I heard my colleagues on the other side say Senator Dodd's bill would ensure taxpayer bailouts, I knew it was false, and I went to Senator Dodd and colleagues on the committee and said I did not understand why these comments were coming from the other side, as if saying this glass of water on my desk is a cup of coffee. No. This glass of water is a glass of water. It is not coffee. And if you say seven, eight, and nine times that it is coffee, somebody might believe it.

That is how I view the comments from the other side that this is guaranteeing bailouts, when in fact it is not.

So I said to Chairman Dodd: I have an idea that we should put together a very simple amendment to the bill that basically says what we know is true: All financial companies put into receivership under this title shall be liquidated.

No company is ever going to be kept afloat. No taxpayer funds should ever be used to prevent the liquidation of any financial company under this title, that all funds expended will be repaid to the taxpayers by the financial sector through assessments or the sale of the assets of the company.

Then, we repeated at the end: Taxpayers shall bear no losses from the exercise of any authority under this title.

I am going to put up the Boxer amendment. It simply fits right on this chart, I say to my friends. It is very simple. If a company is taken into receivership, liquidation must follow. Nobody is being kept afloat. No one's [Page: S2780] business is being kept afloat. They are liquidated.

Recovery of Funds.--All funds expended in the liquidation of a financial company under this title shall be recovered [either] from the disposition of assets of such financial company, or shall be the responsibility of the financial sector, through assessments.

Lastly, just in case people really wanted it stated--and I see some smiles on faces because we worked together to make sure no one could turn this around-- No Losses to Taxpayers.--Taxpayers shall bear no losses from the exercise of any authority under this title.

So let there be no mistake. Senator Dodd's arms were open to this amendment. He said this reflects exactly what we have done. But he said: Senator, if you feel better if we put it in one place, we will do it.

I think it is important for the American people to understand the simplicity of the approach: No loss to taxpayers, period, end of quote. So if somebody goes on TV this weekend and says this bill is about bailing out companies and keeping them afloat with taxpayer funds, it cannot be done under the bill, and this amendment certainly brings it home in a very simple, plain English fashion.

I am proud to be working with my colleague Senator Dodd. I used to sit on the Banking Committee, and I was kind of lured off the committee because the people in California said: We have to have somebody on the Commerce Committee. We have so much at stake there. So it was tough for me to walk away, but I did walk away. But I still retain the relationships.

I am going to go through what is in the Dodd bill that I think is so terrific--then I am going to yield the floor--because Senator Dodd has been talking about this by himself, and I think he deserves to have a bit of a rest and the rest of us should come over here and talk about it.

Again, taxpayer bailouts are done. We know the bill itself does it, but we have made it clear. Taxpayers are covered. We will have a cop on the beat for our consumers. We will know that a Consumer Financial Protection Bureau has only one job, and that is the job to look after our consumers so they are protected from the kind of deceptive and abusive practices that fueled this crisis.

Let's face it, this crisis was fueled by Wall Street, by speculation, no leverage requirements--lots of things--dark markets. This bill takes on these issues.

We see another part: brings disclosure to dark markets. The bill eliminates the loopholes that allow reckless speculative practices to go unnoticed. It brings real regulation to derivatives markets and to the ``shadow banking system.'' I think we are probably going to have some debate over this. But I can say right now, when I worked on Wall Street so many years ago, I have to say--too many years ago to remind myself of, but let's say it was a long time ago, and it was in the 1960s--those were the years when a $12 million share day on Wall Street was breaking all the records. Now a $1 billion share day isn't that much. We did not have these kinds of instruments. We did not have these kinds of toxic instruments that were so complex.

When I asked Treasury Secretary Paulson about it--he was George Bush's Secretary of the Treasury--he essentially held his head in his hands and said: You know, it is hard for me to explain this to you. That is a fact. It did not build up my confidence very much. I have to say, we need to have a financial system that is understandable by everybody. But certainly the Secretary of the Treasury should not have to hold his head in his hands and say: I can't explain it. We have to end those days, and the best way is sunshine.

So I say to Senator Dodd, you did a great job in working to bring disclosure to the dark markets. Senator Lincoln, working through the Agriculture Committee, I think brought us even more protection, and that is very good. Because I think the President said it well. The President said: We want everyone to prosper. We want everyone to be innovative. But we do not want to put our people at risk. When people start losing in the ways we were losing--20 percent of our net worth; 40 percent, 50 percent the market went down--50 percent of its value--a lot of people lost their dreams, and it was unnecessary. But it happened because there were markets that were in the dark, and there were people who were not fulfilling their fiduciary responsibility to their clients.

What else does the Dodd bill do? It curbs risky behavior on Wall Street. The bill provides for strict new capital and borrowing requirements as financial companies grow in size and complexity and pose a risk to the financial system.

Regulators will restrict proprietary trading--speculative gambling--by critical financial firms. We have situations where a firm is advising a client--and we know this happened with Goldman Sachs--advising clients to buy a particular instrument which happened to be worthless. And I cannot use the word the traders used to describe it because this is a family audience. These were junk, and they called them worse than that. They were junk. They were being sold to the customers of Goldman while Goldman was taking a short position--in other words, a position that bet on these instruments' failure. The kind of e-mails that came out were reminiscent of the e-mails that came out during the Enron scandal, bragging about how widows and orphans were going to get hurt.

Well, if there is anything we should do here, it is to protect our people, not put them at greater risk.

There is going to be an early warning system created to prevent a future crisis--the Financial Stability Oversight Council--to focus on the risks before they lead to a crisis. As a last resort, the regulators can break up a company that is too big to fail.

Lastly, of the big accomplishments of the bill, the bill protects against securities markets scams. It mandates management improvements and increased funding for the SEC. The bill creates a new SEC Office of Credit Rating Agencies to strengthen the regulation of credit rating agencies, many of which failed to correctly rate risky financial products.

I have to say, I am working on an amendment that is even stronger because, for me, as someone who relied on, so many years ago, the honesty of these rating companies--these are the companies that say: This is AA, this is AAA, this is A, this is B, this is bad--they are getting paid by the people who have an interest in them giving a good rating. That is wrong, and we have to do something here to insert some type of responsibility to the public. These rating agencies have a responsibility to the public. I am working on some approaches. We do not have it ready. We are going to talk to Senator Dodd, and we hope he will be amenable to it. But we have some thoughts about it.

In this area, the people of this country are putting their hopes and dreams into the financial markets. It has been a great thing, in general, over the years. It has been a great thing because America is a great country, and we have innovation and innovators, and we have venture capitalists who put it all on the line, and they hit, and we can all do very well if we invest, even if we do it through our 401(k) or our company does it through a pension plan.

We know most Americans have a stake in these markets. I heard some things from Goldman Sachs--they said something like this: Well, the people we were selling to were sophisticated, and they should have known better. But they stop short of the truth. Maybe they were sophisticated, and maybe they were not doing their job either; therefore, it trickles down to the people who were relying on that so-called sophisticated investor. All we are saying is, we need reasonable rules of the road. We want to know a rating agency is giving it their best shot to tell the truth about a security. We want to ensure that. If there are new, exotic instruments being traded, that is fine, but let's take a look at them in the light of day so people are fully informed. Then, if you take a gamble, if you are fully informed, that is one thing. But if you do not understand you are taking a gamble, that is another.

So again, I am very pleased we are at this point. Somebody said the only reason we got here is we threatened to work through the night. Maybe there is some truth in that. Frankly, it does not matter to me. We are at this point. We can get to this bill. My Republican [Page: S2781] friends who say they want to improve it--they did not try to do it in the committee, is my understanding--but if they want to do it now, I welcome that because I am sure I will support some of their amendments if they are in the spirit of this bill. The spirit of the bill is protecting consumers, protecting taxpayers, making sure taxpayers are never on the hook, and stopping a situation like this one, as shown on this chart, where every newspaper had pictures of people like this who were at a loss to understand: How could this happen in America? I get the chills thinking about the conversations many Democratic Senators had. I know Republicans had the same conversation with the Secretary of the Treasury and with Fed Chairman Ben Bernanke, in which they basically said: We are on the brink of collapse. We may never come back from this situation.

We cannot forget that. If we do not move to correct the system in ways that are not overly burdensome, but we get it right--and I think Senator Dodd pretty much has gotten to that sweet spot on this thing; we may want to move here or there with an amendment--if we can do this, if we did nothing else--and, by the way, we have done other things, and we will do more--this is crucial. It is crucial to consumer confidence. Consumer confidence fuels 70 percent of the market. Let's do this right.

I thank my Republican friends who decided to work with us. I thank Senator Dodd for his patience, for his passion, and I am very happy he is leading us because he is so effective and he knows what he is saying.

I yield the floor.

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