Mr. President, tonight we had a vote in which 57 Members of this body said we should proceed to have a fully public debate and votes on issues related to Wall Street and Main Street; 57, far more than a majority, said it is time for us to come to this floor, now well more than a year after our bubbled economy burst, and wrestle with the right rules of the road and lane markers for our financial system. But, unfortunately, 57 votes are not enough. We need additional votes from our colleagues across the aisle in order to have that debate on this floor. We need additional votes from our colleagues across the aisle to consider what the lane markers should be and what the traffic signals should be in our financial regulatory system.
Tonight we did not get those votes. Instead, tonight my colleagues across the aisle said they do not want a debate in public on how to reform Wall Street. They want a conversation behind closed doors instead. Quite frankly, I don’t think the American people agree with them.
There are many parts of this story, but it is a story that can be told in millions, billions, and trillions. The millions are the size of the Wall Street bonuses. A single bonus can equal what a working family can expect to earn in an entire career. Then we have the billions, the billions of dollars of quarterly profits of many Wall Street firms. Then we have the trillions. That is the trillions of dollars of damages to working families in America.
What happened when the bubble burst more than a year ago? We had a tremendous loss in the value of retirement savings. We had a tremendous loss in the family savings for children to go to college. We had an enormous drop in employment. We had a tremendous drop in families covered by health care because of the loss of employment. We had damage on every part of a family’s finances, including the value of their home, so that millions of American families today owe more on their home than their home is worth.
Quite frankly, I don’t believe a system of million-dollar bonuses and billion-dollar profits and trillions of dollars of damage to American working families is a system we need in America. Tonight’s vote was about whether to have a public debate on the rules of the road for Wall Street, but it was also about whose side are we on. Are we on the side of some Wall Street firms which don’t believe that any additional rules of the road are necessary?
They are happy with the status quo. Bonuses have rebounded on Wall Street. Profits have rebounded on Wall Street. But if you are not paying attention, let me clue you in. The American working family has not rebounded. Ten percent of American working families are unemployed. Houses are still underwater, savings still decimated.
It is very important we have this debate on the floor of the Senate, that we ask ourselves about and we adopt the right rules of the road, the right traffic signals, the right lane markers to create a solid financial foundation for our economy to thrive.
That is what happened after the Great Depression. New rules were adopted that restored the integrity of the American financial system, that restored the integrity of the stock market. Why was that important? It meant that people throughout America and around the world said: We can trust to invest in the United States because their system has integrity, it has transparency. That solid foundation has served our Nation well for decades until deregulation dismantled it, allowed wild speculation. Wild speculation and wild risk led to a spectacular collapse of the economy, and working families are still paying the price.
So what is the way to be on the side of working families? It is to say: We will adopt those rules to provide that new foundation, that new muscular set of rules that will allow Wall Street to prosper but will also set the foundation for the American economy to prosper.
How should we measure the success of that economy? This economy should not be measured by the size of the bonuses on Wall Street. The success of our economy should not be measured by the billion-dollar quarterly profits of Wall Street firms. The success of this economy needs to be measured by how well we build the financial foundations for working families throughout the Nation.
Do we create the ability to have the next generation do better than we did? Do we create living-wage jobs that enable a family to have significant opportunities for their children? Do we proceed to strengthen, as we have been working at in this Chamber, the structure of health care? Do families in America have a share in the increased productivity of our Nation which has not been the case since 1974, the year I came out of high school? Yes, our Nation had a huge surge in productivity, a huge surge in national wealth. But that has not been shared with working families. That is a diversion from what happened in the earlier era.
How do we rebuild our economy so it builds working families? That is what we are about. We can proceed to look at the pieces of this bill. Senator Dodd, who is here tonight, the chair of our Banking Committee, has put so many strong steps forward on the work that came out of his committee. A lot of folks don’t realize the humble family mortgage and a new product that came out in 2003 is right at the center of the fiasco in our economy.
What happened? A new mortgage called a subprime came out. It was designed differently than subprimes in the past. It was designed with a 2-year teaser rate–that is a low interest rate–then with a prepayment penalty that prevented families, once the ink had dried on the mortgage, from ever escaping that mortgage without giving many pounds of flesh, and then an exploding interest rate that soared from perhaps 4.5 percent or 5 percent to 9 percent or maybe even 11 percent, interest rates that could never be sustained.
This diabolical device was worth a lot of money on Wall Street because it was going to make a lot of money pulling those exploding interest rates out of American families. So Wall Street paid bonuses back to brokers to say to them: I am your financial adviser. I recommend this subprime loan, instead of recommending a loan that was best for the family. So a vicious circle resulted in exploding subprime mortgages.
This bill that has come out of the Banking Committee says: No longer. Prepayment penalties will not be allowed on subprime mortgages. We will break the cycle that led us into this economic fiasco, this financial fiasco.
If my colleagues across the aisle have some ways to improve on that, then let’s have a public debate. Let’s have that amendment on the Senate floor. If my colleagues across the aisle think they don’t want to protect a fair deal for consumers and they want to continue a diabolical subprime exploding interest rate trap that has destroyed millions of families, then go ahead and propose that amendment. I doubt the majority of people will support it. I certainly will oppose it vigorously. But if my colleagues want to do that, then have the debate on the Senate floor.
This bill is designed to end the taxpayer from ever being on the hook for bailing out financial firms again. It does it by assessing financial firms for the cost of unwinding or, to put it a little bit more directly, dismantling a financial firm when it fails. To make sure the taxpayer isn’t on the hook, it creates a fee on the financial industry to pay to make sure those costs are covered by the financial industry itself. This is a buffer that protects the American taxpayer.
My colleagues across the aisle have said: No, here is a fund. It looks like a bailout fund.
Quite frankly, it is amazing what we hear on this floor. Here is a fund designed to ensure that taxpayers are protected, to ensure the financial industry pays their own cost of dismantling their firms. Yet it is spun 180 degrees until north is south and south is north, trying to confuse the American public.
I don’t think the American public is going to be all that confused about this. They want to see the financial industry pay for the cost of dismantling their own failures. They don’t want to be on the hook again. You can try to keep pulling the wool over the eyes of the American people, but it will not work. I say to my colleagues across the aisle, if you want to pull the wool over the eyes of the American people, come here and propose that amendment that puts the taxpayers back on the hook, when we are taking them off the hook. See how it fares. Make your case, make your fair debate on this floor. But come and face and present and debate and vote so that we can proceed to put the rules of the road back in place for Wall Street.
This bill takes a huge stride forward on proprietary trading. It says we should not put fireworks in our living rooms. That is pretty straightforward. Fireworks are wonderful. I love fireworks on the Fourth of July. This bill says they should not be stored in the living room. I have an amendment that I think will further strengthen that concept.
I applaud my colleague, Carl Levin from Michigan, my cosponsor, who has brought forward a part of that amendment and emphasized it, saying we need to address the conflict of interest in financial firms. What is that conflict of interest? You should not be in the position of designing and selling securities, telling your customers that they are the best thing since sliced bread over here, when at the same time you are betting against those securities because you think they are going to fail. That is a conflict of interest. It should not be allowed.
Under the Merkley-Levin amendment, we will address that as well as strengthen proprietary trading.
I am comfortable bringing that to the floor of the Senate and having that debate. It may have a majority; it may not. But that is the type of debate we need to have on this floor.
I could go on through the treatment of derivatives–and I applaud my colleague, Blanche Lincoln–the discussion of a consumer financial protection agency that provides the same fairness in financial contracts that the Consumer Product Safety Commission provides on toasters, making sure that tricks and traps and scams are taken out of financial products so that a consumer can make a fair choice without being misled by something hidden in the fine print. That is the type of option citizens in this country want.
Wall Street plays a very important role in aggregating and allocating capital, but we need to make sure the rules are done such that that role is done well, that conflicts of interest are removed, that transparency is provided, that tricks and traps and scams are taken out of financial products. These are the sorts of things this bill does.
This is a bill that is all about fighting for fairness for Main Street which, in the long term, will be a very good business model for Wall Street as well.
Let’s, as a Chamber, recognize our responsibility to build an economic system that strengthens the financial foundation of our families–that is what this bill is all about–and puts our country on a firm basis for decades to come. International investors will want to invest back here in America. They will trust the integrity of our system.
I encourage my colleagues to come together when we have the next cloture vote and decide it is time to fight for the people of this country and fight for the economic future of our country by proceeding to the debate on this bill and the passage of this bill and getting it to the President’s desk.