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tv   U.S. House of Representatives  CSPAN  June 17, 2010 5:00pm-8:00pm EDT

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from paying off the depositors, she said there are things that you want to try to do to potentially ease this. that money comes from the financial institutions. that is what had been strong allies of my republican colleagues on this. but the fundamental distinction is between the institution that has allowed to fail, indeed must fail before anything can be done, and whether there are consequences that have to be dealt with. .
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that is, he prefers our message to their method. i do think that mr. volcker is reasonableeto quote, but he is entitled to the status of being quoted inaccurately, and he said he does not see any other way to do it. the point is there is no to big to fail, and there is funding with private money only. the question now comes on the adoption of the capital amendment. the oversight and government reform, judiciary, and financial services committee are eligible to vote on this. all those in favor? oppose? teh nos -- the nos have it. do not leave just yet. we are about to call the roll. the clerk will call the roll. >> [roll call]
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>> the clerk will report. the change -- i change mr. cummings from my by proxy to aye aye mr. cummings. no by mr. cummings, i'm sorry. my fault. clerk will report. >> mr. chairman, on that roll call, they ayes are eight and eight nays are 14 -- and the nays are 14. >> that amendment is defeated. there is a great deal of debate. members are free to speak as much as they want. my evening is shot, so i'm going to be here for the rest of the night with my proxy's and with
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or without my colleagues, so members are invited me to -- invited to join me or not. i do not mean to be unfair. the debate has been thoughtful and on point. we can continue that without excessive conversation, and i think we will be okay. i now recognize mr. baucus. clerk will designate the amendment. >> offered by mr. backus. >> i ask unanimoos consent the amendment be addressed. gentleman is recognized for five minutes. >> thank you. we have heard that we are going to have one fund of $150 billion or that could borrow up to 90% of consolidated assets of the largest company -- >> hold on the ccnversation. i apologize. the gentleman is recognized. >> whether that fund is $8 trillion or $150 billion, then we have all gone through this.
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we know that the creditors of the failing institution -- and it would be a failing institution. you can pay the creditors. you can pay the counterparties as they did in aig. as they did in other instances. general motors, chrysler. then, you get to the point where how do you pay off those creditors? how do you pay off those counterparties? the language is contained in two sections. it basically says this -- and has a priority, which is very similar to the priority in bankruptcy. says that you have to pay them off similar to how they are paid off in bankruptcy. you first have to be the corporation first expenses.
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it goes down there, but then there is something very disturbing on page 220 and then on page 228. after, it says that basically, people will pay -- will be paid off according to priority, senior debt, and junior debt. wages before that. then, all of a sudden, it says all claimants covered financial companies similarly situated shall be treated in a similar manner. but then it says this -- it says accept that the corporation may take any action, including making payments to the creditors, to the counterparty that a corporation determines that such action is necessary, so it does not have to treat them that way if the government determines that it is necessary
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to treat someone differently. to maximize the value of the assets of the covered financial cos. they do not have to go by those preferences. to initiate or continue operations essential to the implementation of the receivership of the bridge financial company. to maximize the present value from the sale or disposition of assets of the cover financial companies. they can depart from this preference. to minimize the amount of loss. so basically, we are going to establish a fair procedure of preferences, but then, wide open discretion. we can decide we are not going to do that at all if we deem that possible. how, if people describe what you see in these two sections, and they are on pages 223 and 289 --
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well, one was described as events reinhardt, former director of the federal reserve division on monetary affairs. he describes this proposed resolution authority as bernanke and geithner's star chamber. he knows that the english star chamber experience ended badly. it allows the government special powers. it allows decisions to be made in secret. we saw that in aig where they paid goldman, morgan, and european banks dollar on the dollar. it took us months to find that out. banks in my state are still they did not pay the small.
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they did not pay individual creditors. they lost everything. they did not pay pension funds, remember? california and others lost millions of dollars. but the credit defaults obligations, which wwre the riskiest obligations of all -- they were paid dollar for dollar. why? because they were politically connected. because they were big. because they deemed it was necessary. the word is to determine such actions necessary. they determined that if they did not pay -- >> the gentleman's time is expired. i recognize myself for five minutes to say the gentleman has severely underread the bill. it does not give complete discretion to do whatever is necessary, as he just implied. he did report earlier what it does say -- they can alter this payment for the following reasons, as he said -- to
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maximize the value of the assets, to continue operation of the receivership of the company, to maximize the present value return for the sale of this commission, to minimize the amount of loss. remember, we are talking about the deposit insurance fund -- i did not yield to the gentleman. we are talking about the fdic trying to protect the interests of the federal government, of the deposit insurance fund and elsewhere. if he is trying to recover the maximum amount to minimize what the deposit is, so this is about the fdic. it says the fdic and others have to maximize the return or minimize the loss. that is what this is about. it is about not having more money go out. the fdic has long hhd that mandate in general. the gentleman says with regard to aig, there was political favoritism.
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i do not want to have to referee the fights. aig was done under the bush administration. i think he is being unfair to mr. bernanke, to mr. paulson. i do not think president bush would have presided over such on fairness. when it was initiated, it was from september 2008 until january. they were in power and then the obama administration took over. i think he has characterized them unfairly, but in any case, it is irrelevant because we are doing away with that. that was under a power. that we abolish in the bill. that the senate abolishes in the bill. there will be no more individual intervention of that sort, so this things cannot happen. we're talking about a systematic and orderly process in which we are trying to reduce the loss, so there was no unfettered discretion. there is no ability to favor
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people politically. what there are are conditions that say you may in doing this maximize the value of the assets of the company, initiate and continue operations. what they have done with the bank deposits is what they are doing with this as well here, to initiate and continue operations equal to implementation of the receivership. the institution is now in receivership. it is dying. to maximize the value in terms of sale. this was heavily influenced by the fdic and sheila bear and her experience with deposits -- sheila bair. by the way, as to how tough bankruptcy is, members should remember that a representative officially -- the securities industry and financial markets association testified that he thought the republican approach's bankruptcy was more open " creditor friendly" and our approach, so they were the
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ones who preferred this because they thought it would be more creditor friendly. the fact is that these conditions -- there is conditions on the discretion in both cases, and they are to minimize loss. i hope it is clear now -- nothing in our bill or the senate bill -- we mandate that the institution is down -- dying. we talk about going out of business. question is -- do you just let them die and not worry about the consequences? not worry about a very interconnected world where the lending is cut back where many of us responded to -- or do you try to mitigate not the entity in itself, which is about to go out of business, but mitigate the negative effects of it so that they do not have further downward spiraling effect? that is what this says. we're talking about unlimited
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discretion. i will say this -- i do not think bernanke was trying to pay off his political friends or his economic friends. and he is doing what he thought was best for the country in a stressful time. i do not think any of them did enough to try to deal with the mortgage crisis. i do not think they were responsive enough to our concerns about compensation, but i reject the notion that these men had in pure motives and were engaged in political favoritism or picking up favors and that. in any case, we have prevented that situation from occurring, and we put on the new rules that will guide it. >> thank you, mr. chairman. at a recent hearing, the democrat witnessed, the federal reserve bank of kansas city president called the enhanced bankruptcy a process that assures everyone that the
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largest institutions will be dismantled if it fails, and he continued he prefers a rule of law that takes away discretion from the bureaucrat or from the policy person so that in the crisis, you do not have the option to bail out so that you have to take certain steps to control -- to prevent a financial meltdown. with that, i would yield the balance of my time to the gentleman, mr. bachus. >> and the gentle lady from illinois. as necessary. that is apparently what they did
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with an aig. they decided that because certain european banks had so many obligations, that they needed to pay them off dollar for dollar or they would fail. they did not pay off -- we know with some of these companies that the different pension funds and municipalities were not paid. they determined that that was not necessary. you have two or three pages of establishing a preference, which is very similar to bankruptcy, and then, all of a sudden, you blow it out. i have got a quotation -- this is not me. the chief investment officer at vanguard group point out that the bill allowed -- and he is talking about these two sections i referred to -- allows the fdic to play favorites among
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creditors of a failed institution undergoing resolution. he notes the fdic could provide 100% bailout to whichever of these creditors it favors while imposing severe losses on other investors who bought the exact same bonds. they could decide to do that. even the "new york times" -- the "new york times" is supportive of this bill, but they have expressed concerns about this unprecedented authority. here is what they say -- "if you thought the takeover of aig lacked adequate disclosure like the identity of its counterparties, this process may not be much better." and the aig bailout showed what government and regulators can do when they are given virtually unlimited authority, that the exercise in secret. let me tell you -- the american people, they have seen this.
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it is behind closed doors. they do not like the bailouts -- or they do not even like -- the term could be bailout of creditors or counterparties. here is a list of four or five things they can do. they can guarantee obligations. the american people do not like it. but i will say this of the american people -- if they were to be an unnecessary, if you had to do this and you accept the premise that we have to do is to protect the system, do not all americans agree that everyone ought to be treated the same? that established preferences ought to go? that senior debt, which people got less interest for, that they ought to go first? the unsecured debt ought to go next? why in the world would you all of a sudden get the government the authority to just maximize the value of the failing financial company by departing from what you have outlined for two or three pages as a fair process?
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to maximize the present value return, to minimize the amount of lost the government is going to suffer? they can basically tell the shareholders or bondholders to take a hike. they did that with general motors. and they can do this with this section. it is just unfettered discretion for them to do anything they do. i think we all know that those that are most favored are the largest or the ones that are going to benefit. those that can lobby, that can hire people to represent their interests. let me say this -- if i go into bankruptcy, my creditors, the people that i owe money to -- they have got to stand in line. there is a preference that has been established -- >> the gentlewoman's time has expired. the gentleman from illinois. >> i will try to answer our distinguished ranking member pose a question. first of all, we should understand where the language comes from.
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-- i will try to answer our distinguished ranking member's question. this language is taken right from the federal deposit insurance act. it has been in the federal deposit insurance act for 75 years. why we would now want to remove the very language that the federal deposit insurance corp. has used successfully in an entente manner for the last 75 years scrupulously maintaining its integrity -- why we would want to take it out now when we move forward on the extension fund is beyond me. what the gentleean is saying -- the republicans always call themselves the party of fiscal discipline, but what they are saying -- "do not maximize the value of assets that are covered from the financials. don't. continue operations that are necessary. do not maximize the present value and return from the sale and disposition of the assets."
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and it says, "minimize the amount of any loss." i guess maximize. if you take this out, what you are telling to the fdic is, "maximize your losses. we do not care what it is worth. -- what is worth." i asked b sheilaair this morning, and she wrote to me this afternoon -- i ask sheila bair this morning. she said that it is for for a will to establish a treasury line of credit. i would only ask that one analyze the strong record of the fdic in protecting the deposit insurance fund over 75 years, the fdic has maintained scrupulously in performance with its statutory mandate to protect insurance depositors. the fdic would be equally scrupulous in protecting the integrity of the resolution but consistent with the terms of the legislation.
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they cannot do that if you eliminate these four parts because this is the essence of what they do at the federal deposit insurance. let me just say this -- we are really going to have to decide who is going to pay for this because there is a cost at the cbo -- $20 billion. "is hardly surprising that big banks made the house bill pre- funding systematic resolution fund their top priority for removal from the senate bill. medibank have never paid for the two big to fail bailouts and they're not going to start now. if congress lets them shift the cost, it will be a shameful dereliction of duty, and -- dereliction of duty," and they are right. they should be responsible for their own industry. yesterday, one of my friends on the other side, on the
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republican side, very eloquently put this in the record -- he said no one should have to ensure these people -- referring to the banks -- after the loss has already occurred. some say this would cost $10 million. he goes on to say -- whatever the number, it is wrong to have a retroactive policy in this legislation. retroactivity for the uninsured will depositors sets a bad precedent, increases moral hazard, undermines disciplined, which is necessary for the well functioning of the system. let's just take the same language, right? and use it. if you do not pre-fund this according to the gentleman, it will create a moral hazard because it undermines discipline, which is necessary for the functioning of the system. the same words that can be used about the federal deposit insurance corp. yesterday can be used in reference to the ex-and
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to fund. that is why i think we need to be consistent here and understand that as many times as my friend on the other side say, the senate has a proposal, the house has a proposal. we are in agreement in terms of what the fdic is going to have. where we disagree and i think we should continue to hash out is who is going to pay for it. the industry and wall street, or main street, the taxpayer? that is the critical question we think we have before us. it $20 billion question. >> the gentleman from california? demolition man? was i the gentleman? thank you. i am going to yield in a moment because i know my limitations when the gentleman from illinois and others of you who deal every day in financial service matters, but i might note that although the fdic has managed not to need a bailout from us, there was $124 billion that the savings and loan needed from the
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taxpayers to resolve that problem, and they used the same basic strategy. what we are dealing with here today is the real question, which is if not bankruptcy, then how do you figure out what aig would have had to pay in so you could have $160 billion sitting in this fund? i fully believe that is exactly what we're dealing with today. there will not be enough money in this fund. bankruptcy at least should be an option. something we're saying if not bankruptcy, you certainly should have federal guidelines that tell these people they must respect bankruptcy order and priority so people can invest knowing their priority. with that, i yield my balance of time to mr. bachus. >> thank you. i would like to address the gentleman from michigan, who talked about who is opposed to this resolution authority. he said the big banks, the wall street banks are opposing it.
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let me shed some light on that statement. i passed out a thing listing the six largest companies. let's talk about number two, jpmorgan. jamie dimon says jpmorgan chase has argued for a resolution of authority that would let regulators wind down failed firms in a controlled way. he has endorsed this. i do not think he is opposed to it. lloyd glenn fine -- i think you know who he is. he says we should make sure the consequences of failure are not so great again, and that is the resolution authority. "i'm in favor of the bipartisan bill." how about vic from -- victor pandit, that the city grew, the 93 largest bank. strongly supports the creation
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of the authority. a round table, "we support 80% of the bill, including the resolution authority." >> could gentleman yield, please? >> i will yield. >> my reference is to the ex ante fund. they are opposed to having it. >> i will take that. i am confused. i thought you meant they were opposed to this resolution authority. so they are for that. they just do not want to pre- funded. i will agree with you. they want the taxpayers to fund it. i think we could agree on that. that seems pretty obvious. and it could amount to trillions of dollars. the other thing is who voted. mr. gutierrez said that she left -- sheila bair helped write this bill, and that is not exactly true.
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we know who wrote it because you can read the april 27 article by the "new york times." it said it was drafted in large measure by a law firm that represents many banks and financial industry's lobbying group. mr. geithner hired them to represent the new york fed during the aig bailout. most significantly, the bill does not require any government rescue of a troubled firm be done at the lowest possible cost, as required by the fdic when it takes over a federal bank. treasury officials said that is because they would use the rest of powers only in rare and extreme cases. the managing director of the washington research firm federal financial analytics said it essentially gives treasuryyand blackjack. wheat -- a blank check. we have been asking secretary
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gunnar for a long time how much thii resolution authority would cost, and he refuses to answer, so we do not know. we do not know whether we are talking $seven trillion -- house republicans have written him two letters asking him for a price tag, and he says it is impossible to know. brad sherman asked him in a hearing in this very room. "how much will the bailout ability cost -- >> time has expired. gentleman from pennsylvania. >> i yield my five minutes to the chair. >> the answer to the question is of course no one knows how much it will cost. next year, 10 years, 20 years -- how many banks are going to fail? how many investment houses are going to fail? no sensible person could estimate that. i would hope no sensible person would ask the question knowing there is no answer.
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we do say that if there is any funding, and has to come from the industry itself, which is why they were so opposed to it, as the gentleman from michigan pointed out. by the way, i do not know what their role was with treasury, but i do know this -- we rewrote it. we are not taking orders from treasury, and i know a lot of working people in this room who were shocked to know that they did not do what they wrote. .
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the suggestion this was secretly written, this is nonsense cal. it was rewritten here. the ex-anti-fund, by the way, the obama administration joins my represent colleagues and the big banks in opposing the und. they don't like it. frankly, i think my represent colleagues in the senate were almost mouse trapped into making more out of it than it was. the senator from tennessee were warned about putting all their eggs in one basket. so this notion that it was all a giant conspiracy of big banks couldn't be more wrong. it has in here limitations and conditions precisely to reduce
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the amount. so why can't you give us a number? mr. sherman i have done some constructive work, but he said to the secretary give us a cap. the question should have been, "mr. secretary, can you sit here today and tell us indefinitely for years and years what there will be in terms of financial institution failures and what it would cost ? " the answer is of course not and how can you ask such a question? >> our bill has no preservation of existing institutions. too big to fail, nobody understands how false it is. nobody is too big to fail. should society let them happen, as with lehman brothers, or should we see we are going to go to the financiallindustry, and let me say with with regard to my friends in the senate,
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they want the possibility of a fund that can be assessed against the financial community if it should become necessary. to some extent it is a debate over timing, and whether it would become pro-cyclical. let me say this. we have municipalities that have been at risk and shouldn't have been. i am willing to give them some consideration. again, as the fdic is it, when you are putting one of these out of business, you take into account is there a way to do it that will diminish settlal costs. one amendment that we had that would have allowed a reduction for secured creditors. some of the people got very upset about that, so we are going to afree to restudy it.
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the bill says, both house and senate, the institution dies. the difference with us is are there consequences, unforeseen today that will cause the dissolution that society will have to pay for it. i yield. >> i think you make the point there. but then if you asked him one more question and said, mr. secretary, can you tell us what would it cost us if we had simply a bankruptcy system entirely? wouldn't he give you the answer and say zero? >> my time is expired, but why don't you ask him. i hope i don't look like tim geithner for his sake. the gentleman from texas. >> thank you, mr. chairman. a lot of the debate we have heard recently has to do with
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whether we need an fdic-like regime for these large, interconnected financial firms. i don't think that the chairman of the financial institutions subcommittee is here at the motion, but i know he is saying the very language here is the language used with the fdic, and he about want to grant them this -- and we want to grant them this type of discretion. we had a hearing regarding what i believe the gentleman thought was an abuse of that discretion dealing with a bank, fbop, that i believe was in his district. so perhaps the fdic discretion is not all that it is cracked up to be. i would say that ultimately many of us believe there is a fundamental difference between insuring the plain vanilla for the of those like at bailey's
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savings and loan, and creating deposit insurances of the morgans, the goldman-sachs and the others of the world. why are you trial to -- trying to give the equivalent of for the insurance to these type of wall street firms? we see that fundamentally there is a difference. the other thing i would say about the discretion that the fdic has -- i have the greatest respect for the chair of the fdic. this legislation is going to go beyond that. the bottom line is you are granding discretion that as long as they can look themselves in the mirror and say we are going to treat creditors differently because we believe it will balance the
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financial things of people. that is a big hole to drive through. we are going to frant the ability of the fdic to have this huge pot of money.. and again, we didn't get a clear answer on exactly what that money was going to be used for in the bailout fund, but we know how it was used in cries -- chrysler and g.m. in chrysler, secured creditors got 29 cents on the dollar, and the u.a.w. pension fund, an unsecured creditor, got 43 cents on the dollar. look at the equity. the u.a.w. ended up with 55% of the equity of the new chrysler. it is not a death panel. it is a resurrection panel. it plays favorites, picks winners and losers. here's a good one. fiat got 20%, who i don't
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believe was an additional creditor, and an additional 15% if they could manufacture a car that got 40 miles per gallon. it is in the jurisdiction of energy and commerce when we talk about whether we need smaller, more efficient vehicles, but why that would be handed over to fiat is beyond me. but the point is, and i have no tout that the administration when they put this plan together looked themselves in the mirror and said, "you know what? we need to cut a special day with the u.a.w., because with no u.a.w., we can't have an ongoing g.m. or chrysler." i am sure they justified it that way. i am not sure who in detroit would voluntarily leave a paycheck, but i suppose that was part of the rationale. this is just another facet
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where i believe, unfortunately, crony capitalively could be ememployed. i reject this amount of discretion in ddaling with the creditors or the counter parties of the morgan stanleys or the goldman-sachses of the world. we know under any facet of crony capitalism, you economic future depends lesson how you perform your job at home and more on who you know in washington. what it means is that firms' profit depends lesson how they compete in the marketplace and more how they compete in the halls of congress. we are see the vanguard of that today, and the result is the highest unemployment rate in a general and an economy that is still stagnant when it comes to jobs. we do not need any invitation for crony capitalism. >> the gentleman's time is
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expired. all those in favor will say aye. opposed no. the no's have it. the clerk will call the role and the vote is among the members of the financial services committee and the judiciary committee. >> mr. chairman? >> no. >> no. ms. waters? >> no. mrs. maloney? >> no. >> mr. geithner arizona? >> no. >> mr. watts? >> no. >> mr. meeks? >> no by proxy. >> mr. moore? >> no. >> mr. kill roy? >> no. >> mr. peters? >> no. >> mr. conyers? >> no by proxy. >> mr. betterman? >> no by proxy. >> about bachus?
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>> aye. >> mr. roy? >> aye. >> mr. figure sfers >> aye. >> ms. capito. >> aye by proxy. >> mr. hencerling. >> aye. >> mr. garrett? >> aye. >> mr. smith? >> mr. yithe, aye by proxy. >> the check will report. >> mr. chairman on that role call, the ayes are seven, and the nos are 12. >> we have two more. i am now going to recognize there are four amendments, and i believe they won't take more than an hour?
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>> yes. mr. chairman, it is my understanding that mr. issa has an amendment and mr. hencerling has two. and i believe the two amendments are somewhat similar . >> have we seen the other amendment? all right. yes, mr. chairman? >> let me make it 7:00, and i will to get 6:30. gentleman from north carolina. >> thank you. i have an amendment. the clerk will designate the amendment. >> i ask unanimous consent, and i would note the gentleman from
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north carolina is recognized to speak. >> thank you. i am actually offering this on behalf of the judiciary committee. so i may be struggling a little bit here because it is not an issue that i have been dealing with a lot. the base bill or the senate bill has a provision that says that unless a company consents to the appointment of the fdic as a receiver in an orderly liquidation, the treasury secretary cannot appoint the fdic as a receiver without first petitions a federal district court in the district of columbia. the court has 24 hours to act, and if it misses the deadline, and the fdic is appoint as
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receiver. the amendment i am offering places this process with prompt post-receivership judicial review in which the company would have 30 days to challenge the receivership. even 24 hours is too long a delay when the distress or -- distressed or failed company could destabilize markets, parties could figure out the company is troubled and flee, or it could trigger the systemic event or benefit those who have inside knowledge. there is really not much that a court can do to make a reasoned review of this within 24 hours anyway, so we think this is not a good way to do it. we think that allowing the
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receivership to go forward, yet giving the company, if they have a concern about it, the opportunity to raise it after the process starts is a better way. with that, i won't belabor the point. i'll just yield back and hope that my colleagues will support the amendment. >> is there further discussion? my understanding is the gentleman is offering this on behalf of the judiciary committee. if not, the question. those in favor say aye. opposed no. the eyes have it. the amendment is agreed to. the gentlemen from california is recognize the. >> i have an amendment at the desk. >> the clerk will deciding night the mend. i ask unanimous consent that the amendment is read. recognize the gentleman. >> thank you, mr. chairman. this is a narrow anti-lobby
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provision designed to alay many of the concerns that have happened on both sides of the aisle. as we all know there are only six entities in which the federal government has more than 5% staked today. one of them, stib -- city bank, which is expected to fall below a 5% threshold. this amendment would say that foss those still above the 5% threshold, the president on behalf of the government would have to decide whether or not we are operationally controlling those companies. it is clear with a.i.g. we have an operational control that is a government-designated commission. on the other hand, with general motors it has been asserted by both the administration and general motors that no such control is being asserted, and to chrysler, they claim that they and fiat have the ability
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to design and build cars independent of any government interference. therefore, this amendment would restrict the hiring of registered lobbyists by these entities if they are 5% owned unless the president waives it. the president may waive the prohibition under any section by certifying that the federal government's ownership interest is entirely passive and that no attempt to influence directly or indirectly the operations of the covered entity has or will be made by any officer or agency of the federal government. this would mean simply that if the government is calling the shots, you don't get to have registered lobbyists. the t.v.a. doesn't have recommending sistered lobbyists because the government calls the shots through procedures. the goal here is to have transparency. if the government is not running it, they can have
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registered lobbyists. we have circulated a fact sheet. there are many things that people thought it did that it doesn't do. the u.a.w. and the other employee groups would be free to make their contributions to packs. they would be free to have separate pact activities. this would cover registered lobbyists. general motors, chrysler, gmc would have been allowed to have government affairs officers as long as they did not engage in lobbying. as we all know, there are plenty of people here in washington that are available to answer questions and provide information that fall outside the registered lobbyist statute. we covered it only under the disclosure act of the 1995 act, 2 u.c.s., 1601. it's narrow, for a short time. it is intended simply to have
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us know either the government is calling the case, in which case we do not want to have moneys being spent to lobby us by the government. or they are not calling the shots, in which case we are certainly more than willing to have all of it. additionally, there is no restriction on a corporation or a union belonging to that organization spending unlimited funds in normal advocacy. this only affects the very narrow hiring of the hired guns that often come in and out of our offices on behalf of various interests. as we all know, a great deal of them are not actually members of the company but are actually hired former members. with that, mr. chairman, i would hope we would have your support. yield back. >> i recognize myself for five minutes. being ccvil, i would say i was
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going to call it non-something, but i won't finish that phrase. i strongly oppose this amendment. first of all, it did seem to me that we might have tom hanks here to analyze. he was the professor of symboloyy in the meef "the davinci code". he says we will get registered lobbyists out of your office, tell them to stay out. he says they can still lobby. i do not understand what public purpose is advanced by saying to a company, hirr three more people for your office of government affairs. and by the way, the office of government affairs can be in washington, d.c. so it does not seem to me that it accomplish very much. if it does, it would way overdo what the gentleman says.
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it is not written to comply with what he says. here is the language. you can wave it if the government ownership is entirely passive and that no attempt to influence, directly or indirectly the operations of the covered entity has or will be made by any officer or agency of the federal government. there is no such entity in america. if the government were to move for higher cafe standards, it would be influencing the operations of the entity. it doesn't say the policy. it says the operations. anything the government does, does this. so the waiver could not exxst. the gentleman said it is only the company or has an active involvement. but an indirect influence on the operation is a great tinches. i don't know if -- of an entity
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where the government doesn't indirectly influence its operations. even if we weren't, any federal agency that has any policy would effect it. there is a constitutional restriction here iithink we have to think about. the first amendment is to some extent in charge of protecting people who are annoying. nobody ever tried to shut somebody up who wasn't obnoxious. the free speech exists for jerks. i am all for it. i want to let them speek, and i want to slap them, and i want to slap them. but that is not constitutional. i shouldn't ban them. we are saying but if they take government money. well, if there is 5% government money in there, then they lose a constitutional first amendment right to lobby. there used to be a doctrine
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that said you can't put an unconstitutional condition on a gift. my colleague is a much better lawyer than i am. i don't know whether that has any purchase at all. it seems to be a good thing. if the federal government decides that some public purpose is advanced by taking a small interest in a company, and it then does things not directly through the operation oo the company, but by public policy, not again by making company decisions, but by public policy that indirectly influences the operations of the covered entity, then you can't have a lobbyist. you can have three more people in your office in washington, d.c. but no lobbyist. my colleagues on the other side have said don't micro manage. that somehow it is ok if they do it through the office of
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government affairs. the gentleman sexrelf said that, but they can't do it -- ex-presley said that, but they can't do it the other way. >> would the gentleman yield? >> i yield. >> when i said -- >> excuse me. that is not what the gentleman selled. the gentleman said they could have an office of government affairs. they are people ho lobby on behalf of the company, but they are employees of the company, and they could speak out. they wouldn't or couldn't be registered lobbyists, but they could be in the company's government office and do much of what lobbyists do. so having more people there in the government offices allows them to have some influence on the government. i have to say lobbyists can be a problem. but there is a quality of information you can get. i think banning them from these companies is bad public policy.
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is there further public debate on the pp side? the gentleman from texas. >> i yield for the gentleman. >> mr. chairman, would 25% be a better number? clearly that is significant control. it becomes a government entity. >> would the gentleman from texas yield to me? >> yes. >> then i would ask unanimous consent to amend my amendment to 25%. [laughter] >> if the gentleman would yield to me, better is a comparative term. it is stilllnot good enough. plus, amending on the fly -- if the gentleman would yield, i would give the gentleman an extra minute. i have been trying to be fair about this. this is a new subject not remotely in either bill, but it does affect some things, so we are objecting.
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but it is a new subject. amending it on the fly, that is why i objected. >> would the gentleman field? >> i don't like it now, but i think -- 25%, directly or indirectly, i don't think that is a good way to legislate. >> i will continue to yield to the gentleman from california. >> mr. chairman, you and i served on judiciary quite a long time together, and as you know, this is the kind of thing that happened there. maybe conferences are inherently different. however, if the concerns of the gentleman are indirectly, i can accept that. if the concerns are 5% being too low. that happens to be a normal, quote, declareable amount. 25% is fine. the whole goal here is that we want to have a level of transparency. either the government is operationally controlling an
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entity, in which case, i am sorry, but the government does not have a first amendment right to lobby members of congress in this wield. >> would the gentleman yield? >> yield to the chairman. >> i appreciate that, but there is a long difference between 25% and operationally. i would say to the gentleman i don't think it is reasonable to keep amending it in the way he keeps talking about. i don't think it is well drafted. i agree that the government shouldn't lobby. if the government is operationally controlled, that would be a different story. but knocking out indirectly and going to 25% doesn't put the government in operational control. that is why i would need more to look at this, and in the current situation, i don't like the amendment as is, and i am not prepared in five or six minutes to say what about this, that or the other. this is too important a subject. >> would the gentleman yield? >> mr. chairman, i would ask
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unanimous consent because i hope to make comments on my own. >> the gentleman gets another two minutes. >> thank you. i will end by saying this is not a hypothetical amendment. and although the gentleman may not like it's curent form, rejecting itoff hand begs some important questions. companies were -- which were invested in by the federal government made 180-degree turns on certain things they believed before the government bought them. that is a subject of investigation of my committee. it continues to be an area of legitimate concern. we are perfectly happy to recognize that the government may vote its interests on behalf of all americans, and we have no objection to that. we simply want transparency. this amendment was drafted in order to create a level of transparency. the real goal is in the language of the presidential waiver. we need to know what level of
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control the government intends to assert. we are all acutely aware that for some reason, general motors, who had primarily funded the objection to the so-called endangerment filing on carbon, if you will, leading to cap and trade, did a 180 after the government owned them. that is a subject of considerable interest, because when it came to making cars, it was not in mayor best interests to mmke a 180 even if ultimately they intended to make cleaner cars. >> i agree with the gentleman. that deserves investigation, but it doesn't affect his amendment. it reinforces my view that it is a shot at a ppactice that is a serious problem, but ought to be pursued through the investigation and not through this amendment. i won't have anymore to add. >> thank you, mr. chairman, and i thank the gentleman from
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california for both allowing me to speak on my own time now. i believe that the gentleman from california's amendment deserves very serious consideration, and it does raise some serious issues. i listened closely to the chairperson, and i think he raised some legitimate issues, too. but i recall, as i think we all do, those harry times that -- hairy times back in 2008 when tarp was formed, which was meant to be an emergency piece of legislation to deep with an emergency situation. what tarp was is no longer what tarp is. .
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and lobby the government for perhaps even more taxpayer funds, that should be an unacceptable activity. i know that it is juxtaposed against the first amendment right. it is a popular sport to- lobbyists, but the right to perdition agrees that this is enshrined in deep -- and the right to petition agrees that this is enshrined in the constitution.
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it is an extraordinary piece of legislation. we can debate its wisdom. i did not believe that it was a wise piece of bread let -- of legislation, but i respected those who did. but what harper was is no longer what tarp is. i believe some vehicle needs to be aimed at the ability to leverage taxpayer funds to ultimately turn around and lobby for more taxpayer funds. i certainly believe all the language is somewhat new to me, that probably the gentleman from california has at least made a good-faith effort to achieve a very delicate balance. i would urge support of the amendment and i yield back. >> the gentleman from alabama. excuse me, from ohio. >> i appreciate your comments.
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but sometimes, symbols have value, too. we bailed out the banks, and they turned around and lobbied against us as we were trying to craft the very reforms that would keep us from having to bail out the banks again, just like they are lobbying against the fund that we have just talked about. although i do appreciate the arguments of my democratic colleagues, i am going to support the gentleman's amendment. i yield back. >> is there further debate? if not, the question is on the amendment. all those in favor? opposed? the no's have it. the gentleman from california asked for a roll call. the votes are from which committee?
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the financial services judiciary and government reform. the clerk will call the roll. [roll call vote] >> ms. waters votes no. mrs. maloney votes no. mr. gutierrez no by proxy. mr. moore votes no. ms. kilroy votes aye. mr. peters votes no. mr. conyers, no by proxy. mr. burman, no by proxy. mr. towns votes no. mr. cummings votes no. mr. bacchus votes no.
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mrs. kapatow votes aye. mr. garrett votes aye. mr. smith, aye by proxy. mr. -- >> the clerk will report. >> mr. chairman, the ayes are 9, the nays are 13. >> the amendment is defeated. i think there were two more amendments. >> i have an amendment at the desk. >> amendment no. two. i ask unanimous consent that the amendment be considered as read and the germans recognized for five minutes.
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>> given our previous conversation, i will not need to 5 minutes. this amendment would strike the provision of the house offered to the definition of section 201 that would define the term financial company specifically to exclude fannie mae and freddie mac from eligibility under title to's orderly liquidation authority. the amendment would also explicitly state that fannie and freddie are eligible for fdic receivership and orderly liquidation under the title just the same as any other financial company. given that my next amendment also dealsswith fannie and freddie, perhaps we can defer the usual debate until that point, mr. chairman. if you're prepared to accept, i am prepared to yield. >> they're going to be late to
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the party in 2008, 2007. the house passed a bill giving the bush administration severe powers over them. in 2008, they said that they need at the power of instant conservatorship if i want to do that. the senate and house concurred. secretary paulson under authority given to him by the congress in 2008 put them into conservatorship. since 2008, they have been very different. so fannie and freddie have already been subjected to a very severe form of restriction. what this amendment says is that we have to make sure they get the next step, being put out of business. i agree with that. if they're not, by this time next year, replaced by new system, and by only objection is that i think there needs to be a new system involving the role
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that they played by other entities and sorting out the home loan banks of the private sector. i will be disappointed. the question is on that amendment. all those in favor? opposed? the amendment is agreed to. the jump in from california is now recognized. the gentleman from texas, you're recognized for the second amendment. the clerk will designate the amendment. >> amendment to the house offering -- >> i asked that the amendment be considered as read. >> this particular amendment would require that all financial companies that meet three specific to big to fail criteria be placed on the quarterly liquidation the authority procedures set up under section 202 of the base text.
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the criteria that would trigger automatic determination's for the secretary to appoint the fdic receiver financial company include if the government owns at least 1 million shares of the company for more than one year. the company has received at least $50 billion in taxpayer funds, and the company has had at least $1 trillion of outstanding mortgage-backed securities in the market as of october 3, 2008. currently, i am aware of only two companies that satisfied all three criteria that would automatically be placed on the orderly liquidation authority. those companies are the government sponsored enterprises of fannie mae and freddie mac. again, i don't necessarily believe in the too big to fail authority and definition that has been set up for the resolution authority, but if it is going to be set up, are there
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any greater poster children than fannie mae and freddie mac? i would also point out that these were not born of a competitive marketplace. but in many respects, born in a government laboratory that were allowed to go out and exploit their implicit government guarantee, the duopoly status, and we know the rest is history. we debated earlier in the week, we will debate next week what the root cause of the financial crisis was. many of us believe it was federal policies that strong armed and in scented people to buy homes they could not afford to keep. at the epicenter of this was fannie mae and freddie mac. what we have today and under the earlier agreement, there would be the ability for the fdic to put them into liquidation
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authority. this would essentially mandate that. otherwwse, the status quo today, under current law, fannie mae and freddie mac can stay in a perpetual conservatorship, conservatorship in perpetuity. many of us do not believe that is good public policy. we're looking at almost 147 billion reasons why we should not have the conservatorship in perpetuity. that is the amount of money that taxpayers have already had to pay. the vast majority of the financial markets regulatory bill has let fannie and freddie out from the end. this makes no sense to me. what we do know, and this has been entered before.
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we're making decisions they're not being guided solely by profitability that no private bank ever could. how is the taxpayer ever going to recoup $147 billion and counting if what we essentially have is institutions that are an arm of the failed government housing policy, in this case, a failed foreclosure mitigation plan. the former head of freddie mac has said that the government is running fannie and freddie as an instrument of national economic policy and not as a business. ultimately, there is the debate. surely have a fannie and freddie exist with the current taxpayer hemorrhage and ultimately with the potential to serve in that area of perpetuity, or should they go to this orderly liquidation authority that i should add will not happen overnight.
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under section 202, the appointment of the fdic can last up to five years. three years in a receivership with the possibility of 21-year extensions. -- two one-year extensions. they are not necessary. we know the havoc they have reached -- wreaked. we have to stop the hemorrhage, we have to move to competitive markets, and this bill will achieve that. i yield back the balance of my time. >> i agree with much of what john and said, -- of what the gentleman said. i want to " a man who served in a high position in the reagan administration and both bush administrations.
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[unintelligible] i have always been skeptical of that. it was not just a monetary situation, it is a situation of being put in charge of the house where you need to have the capacity to make tough decisions depending on the degree of integration, the mayor may not be a good idea. i have been an advocate for affordable rental housing. we see continued insistence on putting -- pushing fannie mae and freddie mac that persuaded me to switch my position on it. they agree that it has been a mistake. on the other hand -- it would also agree that fannie mae and freddie mac have to be reformed. the gentleman quoted people as saying that it is one of housing policy. they're part of the housing policy of the u.s.. it does underline the fact that people said that we need to reform fannie mae and freddie
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mac are wrong. under the bush administration, we have the ability to put fannie mae and freddie mac into conservatorship and remove them from private operation. that has been done. there is a great loss to some of the owners and bondholders and the cost to the taxpayers. the loss is largely came from the time before congress passed legislation to allow them to be restrained. the question is not whether fannie mae and freddie mac should continue to exist the way they were, they have already stopped doing that. it is now whether they should continue forever, long before the five years, they will be replaced. that is the key. it does not seem to many of us, reasonable to simply abolish them in their current form in which they finance much of the housing very differently than they did before. they're not buying stuff that --
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ttey are important source of housing. it was a considerable cause of our collapse including inappropriate purchases by people who were induced or what ever into buying houses. but if we were now to shut down the housing market contribution made by various entities including fannie mae and freddie mac, it would further exacerbate our economic differences. that is why the national association of realtors, home builders, mortgage bankers, every entity conserve with housing are saying yes, please replace fannie mae and freddie mac, but don't just shut them down. we already put them into conservatorship. they're not repeating the mistakes of the past. we have a conflict. we have confusion. we have the fha that the house
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voted to reform almost unanimously. we have the national mortgage association, the federal home loan banks, private banks with a public mandate. i shouldn't have said that, but we have to look at how that works. we have the private market. there should be entities that helps securitized the balance of mortgages subject to risk retention. not the way fannie mae and freddie mac did it. we have a question, do we want any kind of subsidy for homeowners, now for people at the lowest end, but there is a situation -- are their efforts that could be made in a responsible way to help them afford homes? there is affordability for people on the low-end, you don't want to exclude anybody, but that ought to be the preface.
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immediately abolishing fannie mae are freddie mac or deciding to do it before we have decided what set of arrangements could be public and could be private would be destabilizing to the economy at a time when it is trying to recover and through the housing market. i supported the first amendment, we should be very clear and i hope it will be put in the status at some point fairly soon, but only after we have lived up to our congressional responsibility to sort out these things. i hope it will be done by next year. i hope we will begin drafting it this year, a new set of housing arrangements without the kind of confusion that led to the palms of fannie mae and freddie mac. is there further debate? if not, the gentleman from new jersey. >> i think the chair. the chair says that by closing them down immediately, it would be destabilizing to the economy.
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the gentleman from texas just read through the statute point with regard to the unwinding and as he indicated in his testimony or in his statement, it would not take place immediately since the fed would have upwards of five years to do so. if the chair or others are suggesting that our solution and our relief for the problem we have right now is not going to be addressed within the next first three year initial time or the extension after that, that is the bigger problem. >> i said directly to the contrary. i said i would be very disappointed we have not done that by next year where the gentleman imply that i wanted to wait three years?
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>> reclaiming my time, the reason i said it was because prior to you speaking, the german from texas specifically said that there will be upwards to five years for this to be resolved through the liquidation authority. he said that we should not do this immediately. perhaps the chairman was not listening let me finish the thought. that a woman from texas never said that it would have to happen immediately. yes, even under the proposal, this committee would have the opportunity to go forward as the chairman indicated to try to come up with it, but this would at least put it in place under the bill so to give the instruction to start the process. >> what i was concerned with was some people saying that they assumed it was going to be immediate. i still think it would be a mistake for what it might do in
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terms of impact to the market. what i am being told is that all this says is that it has to be done sometime in the next five years when we will have done it before that. i will vote against it, but it is no big deal. >> if it is no big deal, then maybe just accept the amendment and let's work together on the resolution. i would suggest that as much as an immediate closing down of this could have a negative impact on the economy, i would suggest the fact that the government is explicitly right now on the hook for over $1.90 trillion of risk with fannie and freddie, that includes $1.30 trillion and $170 billion that was bought by the fed, i was suggest that that is causing a destabilizing effect on the economy. i would also suggest the fact that when we have the chairman of the federal reserve asked
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whether he could tell us whether this debt, the $1.90 trillion of risk and of mortgage-backed securities, whether or not this obligation is sovereign debt or not, when the chairman of the federal reserve cannot answer sort of an accounting issue -- when the secretary of treasury likewise cannot tell us whether that is sovereign debt or not, i think those aspects are a destabilizing effect on the economy today. that may be one reason despite all the stimulus dollars we have been spending, despite the deficit we are incurring right now and the current budget deficit, this exacerbates the destabilizing effect. if we were able to take or give one glimmer of hope going forward and say that we are grasping at this problem without a full solution in place and adopt the amendment and say that
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we are requiring that the liquidation authority begin an orderly process within the next five years, i think that will have a stabilizing effect. with that, i yield back. >> the question comes on the amendment. the amendment is not agreed to. a recorded vote is a -- requested. is it three or two? the clerk will call the roll. >> [roll call vote] ms. waters votes no. mrs. maloney votes no. mr. guitierez no by proxy. mr. moore votes no. mrs. kilroy votes no.
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mr. peters votes no. mr. burman no by proxy. mr. baccus votes aye. mr. royce votes aye. mrs. kapatow aye by proxy. mr. garrett votes aye. mr. smith votes aye by proxy. mr. kandorski votes no. >> the clerk will report. >> on that vote, the ayes are 7 and the nays are 12. >> the amendment is defeated.
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i believe we have the final amendment on this title. the clerk will designate the amendment. i ask unanimous consent that the amendment be considered as read. the german from california is recognized. >> -- the gentleman from california is recognized. >> there is a credible big bang solution that imposes losses that will be difficult to enforce, especially when regulators are explicitly directed to mitigate disruptions of the financial system as they are in the proposed reform bill. just a thought, chairman, but as a way to sort of overcompensate for this, because i think it has to be addressed, this proposed amendment which i won't ask for a vote on, but i will ask you to consider the substance of it to see if we can mitigate this to some extent, it addresses this
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specific concern of the federal reserve chairman. he argues that the fdic would be allowed to provide funds to the receiver that could be used to settle short-term debts as they come through. the protection of short-term creditors weakened the incentives of the most critical liability holders despite the best intentions, authorities will invariably error on the side of rescue which will further weaken market discipline and lead to an ever widening sphere of intervention and destroy the incentive. that is the argument. how you handle it? one way to do it would be to require that the fdic estimate at the outset of the resolution process what creditors would have received in bankruptcy and limit what the fdic can't pay creditors during the course of a resolution to what they would have received in bankruptcy.
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the thought here would be that you make this last a 20% haircut that would act sort of as an insurance mechanism against future write-downs, the residual course being returned afterwards to theecreditors. that would give you something that would approximate what would happen. therefore, you avoid a situation where you basically have given a competitive vantage that allows these firms to borrow at such a low rate to fund their activities on much more favorable terms than would ever be available to their smaller competitors. this is our worry, that these firms are managed as a consequence and get over leverage. >> i have a question that i would ask. >> certainly. i will yield. go ahead.
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>> i was going to take my own time, i thought you were done. i just want to ask -- i confess, i should probably know instantly. does this apply to depository institutions? does this apply to what the fdic does or only non depository institutions? >> under the way i perceive the legislation moving forward, this would handle -- it would apply to all resolution authority cases no, no. i am not as concerned with the current charges. i didn't ask the illinois concerned, it is an amendment -- if he was concerned it is an amendment. >> that is one of the points i wanted to make.
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i don't understand this is a principle that which people would adhere to, which except depository institutions, too? the highest priority would be paid out of the insurance fund. the fdic tries to limit the amount we would have to pay out of there by following the preferences that the gentleman from illinois pointed out. the question is, if that standard -- we should not worry about the government saving money, if that is the way it ought to be and not those other factors that the gentleman from alabama mentioned and the german from illinois said, why does this not apply to the fdic's work with depository institutions? understanding that this would not affect their obligation to pay off deposits, but if this is the appropriate measure, why does it not apply to the non insured deposit aspects? i wheeled to the gentleman. >> most of the firms which the
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fdic oversees are not those where you have the moral hazard problem. you're not dealing with firms that are perceived -- >> that contradicts what the gentleman said earlier because he quoted the control of the currency in 1984 where jurisdiction is only over those types of institutions. i have to say that. does that mean that bank of america does not have that issue or j.p. morgan chase? >> i am not trying to win an argument here. what i'm trying to do is convince you, chairman, that the federal reserve board members are concerned about a specific type of institution. investment banks. they're concerned about these firms that are too big to fail. >> i accept that. what i am saying is, i don't think this is the right approach. if it was, there is no basis.
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i am not just trying to make argument points, but apparently, the problem of too big to fail, assuming the moral hazard is too big to fail, i don't understand if this is the right approach. why applied only to non depository institutions and not to them? i am willing to work with the gentleman on this. there are three aspects of this resolution and i think we are in agreement on a couple of them. one of them is that the institution dyes. no taxpayer money should be involved. the third question to talk about is, does it create moral hazard if you say that in some circumstances, the death of one of these large institutions whether it is a bank or non- bank, creates the potential of turmoil such that funds ought to be available to minimize the
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impact and that the preferences of the fdic have reduced costs and should be involved. i don't think this is the way to resolve it, by disregarding that. if it was, it ought to apply to the fdic. i yield the rest of my time to the gentleman. >> you are applying this to a different model of institutions. institutions that don't even take deposits. 98 percent of insured deposits are not resolved by the fdic currently. but they are not in the business of dealing with these institutions. this brings in a whole different class. depository institutions include bank of america. i reject the notion that the fdic -- they had to resolve what
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cobia -- wachovia. it had to resolve other large institutions, so i would reject that. let me put this to a vote now if i could. >> i wasn't going to comment, but i think you brought up a perfect thing, you're talking about the fdic resolving wachovia. they engineered a deal with citi for about 1/3 of the amount that wells fargo walked off the street and offered them. not only are they going to guarantee a lot of wachovia's loans and liabilities. when wells fargo came in with an offer three times as large, the federal regulators were upset at wells fargo.
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southwest bank in my district, i had probably 2000 constituents that owned south trust stock. and had the fdic been successful in what they plan to do, those people -- many of the retirements would have been 1/3 of the size they had been. if when wells fargo bought them. >> when -- will the dome in yield? >> of the fdic did a horrible job. >> what is your amendment not change that? you make my point. it does not apply to the fdic depository institution. if that is what you're worried about, why don't you apply it to depository institutions? under the amendment you are talking about now, that would not change and it would still be the fdic. i don't understand if you really
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mean that -- >> i would yield the gentleman from california. whether it is the fdic or a federal reserve, the bankruptcy enhanced process we are able to take derivatives and all these other problems we have to go why don't you apply it? put your legislation where your mouth is? >> in the case of wachovia, had wells fargo not walked off the street -- >> why don't you change it then? you leave that situation untouched? >> what you are basically taking is a situation that worked very inefficiently >-- >> and believe it untouched. >> the resolution that you're
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putting forward deals with non depository institutions. i am withdrawing the amendment because it is not to get a vote on this amendment. i am trying to get the members to focus on this reserve that governors have on the effect that this is going to create in terms of interest rate that will end up being a full percentage point less for the institutions -- what is going to happen is that they're going to go out and do exactly what fannie and freddie did to their competitors. they are going to be a huge consequences to this in a marketplace. somebody at some point in time is going to have to listen to the governors and think of a way to compensate for that.
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>> i have talked to mr. bernanke, this is not a widespread concern among the government. you did mention one regional bank president. the other thing i would say is that it is a problem. it would be in order for thee gentleman to offer an amendment to cover the banks. why do you shy away? on the fed governors, would you give me a list of governors that hold that view? i don't know any governors that do. >> as i say, my intent here -- the amendment is not going to pass. i raise it in the hopes that as this moves forward, if this is not the method to deal with it, we need some other methodology to overcompensate for the effect this is going to have on the marketplace. >> i agree with that. >> i withdraw the amendment. >> the question is on making the offer of title to to the senate.
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all in favor? all opposed? the offer is extended to the senate, and our senate colleagues are trickling in. we will now await -- i understand the senate is going to present a counter offer not on this, because they just got it. we will now -- it should we recess? we will take a recess and we will reconvene when our other senate colleagues and senator reid is here. we will stay in recess and we will convene as soon as the senators come in, so don't go too far. don't go far. [captioning performed by national captioning institute] [captions ccpyright national
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cable satellite corp. 2010]
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>> house and senate conferees have been working on amendments to the financial regulations bill. this is the fourth day of conference meetings meant to merge the house and senate versions of the bill. this work is expected to continue into next week, working section by section through the legislation. and we are continuing to bring you live coverage of the house and senate financial regulations conference. you can find all the meetings of the committee any time on our web site at
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>> have you gaveled us then? >> there are no votes in the house tomorrow, some amendments -- and have asked me if there were going to be any role calls tonight? can you tell me your agenda? let me just say this. we are prepared to accept your counteroffer on the federal reserve title, and i don't anticipate there is going to be a roll call. the only issues there would be the amendment where we have to acquiesce. in that one, i would tell my
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members we would not have any roll call votes. i don't think those are controversial. i don't think there will be anything else we are voting on tonight. >> we will make our counter offer to you on titles one, too, and eight. >> we have to study them. >> i understand. there will be amendments offered on our side that we will try to deal with expeditiously. >> we don't want any backroom deals. we'll be right here with you. [laughter] >> this is about his background as i have been. >> let me say to the house members, but me just say this. i move that the met house acquiesced to the counteroffer on which title? title 11 which involved the
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federal reserve. all those in favor of acquiescing to the senate counteroffer? opposed? that title is now finished. there will be no more votes take on the house side some members can leave. >> we know you want to stay here all of this, too. we look forward to your presence here. >> my evening shot already, senator, so what the hell. >> in consultation with my colleagues, while you presented no. 8 to us first, we will respond one, too, and eight. our response and our counter offer, we will entertain some amendments that my colleagues may have on what ever these titles. while this language may pertain to either one or two, i would note that when we first began
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consideration on the floor of the senate to by the financial reform package, the very first amendment that we considered was adopted unanimously and there may have been one at-vote on it. our colleague from california -- that amendment is simply read that all financial companies put into receivership shall be liquidated. no taxpayer funds shall be used to prevent the liquidation of any financial company under this title. it may have sounded redundant, but this is a reflection, i think, of virtually unanimous a peelings by those in the senate. we then adopted the shelby dodd amendment that laid out very specific criteria to try and make what we thought was clear already in our bill, but nonetheless, senator shelby offered ideas that i agreed to even further, making it clear
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that it was all of our intentions to see to it that we never expose the american taxpayer to what happened in the fall of 2008 and the beginning of 2009. i will stick with the script on this to make sure i move along quickly. we will try to address every issue that has been raised. i have said to our house colleagues, while we follow the debate back and forth, i believe we have picked up the amendment adopted on your side. if there is any slippage, let us know right away. some of these have been included in the counter offer. the house offer basically replaces -- and this is talking about title 1, the entire text for title one that is designed to address risk -- a systemic risk with the house bill text and a handful of provisions.
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what we can't accept -- that we accept the clarifying language in section 171 as modified. that is the amendment from senator collins. to ensure that future capital standards or banks are not weakened. we worked with our colleague and her staff to modify the house offer on the amendment. it included a number of provisions to clarify section 171, including phasing in capital requirements, grandfather in the treatment of securities, bank holding companies in carving out the federal home loan banks under $500 million, and assets for the requirement of the amendment. in addition, the house offer contained a provision that could undermine section 171 byline regulators to effectively it ignore the primary requirement. we would strike this provision. we would modify the house ffer
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to grandfather bank holding companies rather than a grandfather and all bank holding companies. i realize there is a difference of opinion on that. i think there may be an amendment to that counter offer that i am making to you. we would add a study on expanding access to capital. we can also accept the following language, adding four nonvoting members that would be the head of the federal insurance office and state regulators for banking, security, and insurance. giving the council additional securities to identify threats arising from outside the financial services marketplace. requiring the council to report to congress on resolution activities and requiring the council to consider the nature, scope, and a mix of the non-bank financial company activities in determining whether the company should be subject to new
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supervision. when risk-based capital and leveraged standards are not well-suited to the company's activities. that resolution plan submitted by complex companies are not binding. they provide backup examination and force the authority at large. we cannot accept the rest of the house offer. the senate bill was drafted over many months. this title reflects the work of our colleagues, and title one of the senate bill is a carefully crafted framework built on a number of bipartisan provisions. the senate bill creates the office of financial research to collect data and conduct research on behalf of the
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council to assist with monitoring systemic risk. as a result of hard work, this office of financial research would provide a valuable source of financial data, independent research, and expertise on emerging financial markets to support the work of the council. and importantly, unlike the member agencies, this office would not be burdened by the potential conflicts that arise from also having to regulate a class of financial institutions. it's only job would be research and analysis on behalf of the council. the senate bill would ensure that commercial companies would not become subject to financial regulation. senator shelby and others spent months debating the standards for subjecting companies not under federal banking regulation to new supervision and stricter standards.
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we have heard concerns from a range of manufacturing and commercial companies that they would be swept into the proposed financial regulatory regime. to address these concerns, we reach a bipartisan consensus to compromise with the amendment to provide certain assets and revenue thresholds' to clarify what a financial company is along with protective measures to prevent invasion of these rules. this bipartisan provision is a very important part of the senate bill that provides greater certainty to manufacturers, retailers, and other commercial companies that they could continue to operate as commercial companies without unintentionally getting swept into financial regulation. the senate approach in title one has the benefits of avoiding a separate designation of all the systemically pressed companies by the fed. instead, the majority of financial companies that could -ppose a risk to the financial
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system would, without singling them out, be subject to a system of heightened standards based on the risk that they pose to financial stability. for these reasons, we cannot accept the rest of the house offer on title 1. at the end of the day, they are substantially similar. as i mentioned before, we're expecting -- accepting a number of provisions to what we believe they carefully balanced bipartisan framework in the base text. that is our counter offer on title 1. let me jump if i can to title to, and then we will open up the process. the base text -- the senator from virginia at my command at some point and wanted to be heard on these titles. he's not going to come? he was going to come. they have the authority to unwind large complex financial
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company whose bankruptcy could put the entire financial system in jeopardy. so that we end the practice of too big to fail once and for all. as is the case with much of the bill, the approaches are very similar. we worked very hard to craft a bipartisan solution for ending too big to fail. senator shelby and i have been engaged in an ongoing discussion regarding systemic risk and the too big to fail issues related to financial reform. last fall, i ask the senators to form a working group to come up with a bipartisan proposal to address systemic risk. when they presented their proposal, it formed the base for that part of our legislation. it was marked up in the banking committee earlier this year in march. we could not bring the bill to the senate floor. as you recall, our friends
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argued against bringing the bill up. we had several cloture motions to end the filibuster, and it went on or several days. it was only when senator shelley and i were able to reach an agreement on a bipartisan proposal on title to that the filibuster and and we were allowed to move to the bill. title to that became the basis for the conference text therefore, is a key element of the senate proposal. we would not been able to pass this legislation without the shelby-dodd amendment that carried a 93-5. the language that we crafted create an orderly liquidation authority for the purpose of ending too big to fail. most financial firms ould still go through the normal bankruptcy process if they fail. the new liquidation authority would be used very rarely and have to be -- we have put in
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high hurdles to trigger its use. its use, the liquidation process would provide for an orderly winding down of complex institutions while still forcing shareholders to be wiped out and creditors to bear on losses. any payments to creditors would be clawed back and a large financial companies will be assessed to ensure that taxpayers do not lose a penny. the house has provisions that are very similar. from the house offer, we can't accept -- we can accept is studying the impact of securing creditor hair cuts. one modification we would make it to have the counsel to the study said that they have the benefit of the experience represented by the different agencies on the council including the fdic. we also accept the technical amendments that contained a number of useful clarification and corrections.
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again, we respectfully cannot accept the following provisions. replacing the definition of financial company. this is one of the key elements to ensuring that the liquidation authority but not broadly cover commercial companies, but instead of your normal bankruptcy. at the urging of senator shelby, the definition has an 85% revenue test to be considered a financial company that is eligible to go through orderly liquidation process. the number was not taken out of thin air. it is used under existing legislation. the house offer seeks to replace it with a loose definition that we would have a hard time accepting. the requiring permission to trigger orderly liquidation authority and adding unnecessary language regarding insurance companies, the house offer would require permission from insurance regulators before the holding company or its subsidiary could be put through the orderly liquidation process.
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the house offer makes the insurance regulator along with the fed and the treasury one of the three keys for triggering the orderly liquidation authority for an insurance holding company. to clarify, the state regulated insurance subsidiaries would not be put through the orderly liquidation process, but would instead go for the orderly state liquidation process. holding companies could be eligible to go for the orderly liquidation process. we could not accept this provision because we should not require federal agencies to get permission from a state official before they can fulfil their federally mandated duties. the house seeks to keep the fdic awake in the assets -- and restricted the fdic's use of those assets. the additional language is not necessary, and we respectfully cannot accept it. the conference based textile re states that an insurance company would be resolved as provided
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under state law. furthermore, the absence of a solvent subsidiary as with other corporations are always used to first pay the debts of the subsidiary and second the debts of its parent, in this case, the insurance company. it is true if it is part of a financial company place under title 2. there is no alternative under corporate law. the fdic concurs that this language is not necessary. my good friend is the author of the provision, and let me just say that we debated this at great length back and forth. we originally had it in our legislation. the argument and debate that you had over here was a very good one. this is one of those issues, again, you can make a case either way. you have had a good robust debate on it today, my good
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friend of the house chairman. we had $150 billion -- colleagues on both democrats and republicans, mostly from the republican side -- differ with me if i have overstated that case -- objected to the fund as part of the shelby-daughter agreement. . .
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requiring the fdic to have a separate sub corp, they would require the fdic to have a separate subsidiary. we believe this is not necessary because the fdic is already required to maintain the receivership and separate accounting. but we cannot accept unnecessary bureaucracy without tangible benefits. is worth noting the fdic does not support this provision under the senate construct. to my colleagues, on section 8, let me finish with that. that may offer some general thoughts.
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this is one that more work will need to be done on. let me lay out our concerns in this area. the house has offered to strike all of title 8 regarding payment clearing and settlement supervision. i like to respond to some of the concerns raised by our colleagues in the house and explain how this actually works in our bill. first, i agree with chairman petersen the fed did not do enough to regulate subprime mortgages. we all agree on that. under the first hearings that i held as i became chairman in january, 20007, -- 2007, it was on the subprime and residential markets, and we had dozens of hearings thereafter on the subject matter that identify the regulatory breakdown that has been discussed widely already. this is why we are creating a new independent consumer protection bureau with its own presidentially appointed head and funding.
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in terms of the authority that is conferred to the fed, they already regulate the vast majority of financial market utilities. tidal 8 would preserve the front line row of theeexisting regulators, but require or bust+ prudential standards for entities designated by the council, not the fed, as systemically important. the concern that having a council of regulators representing every corner of the financial system as promoting noncooperation confounds us. the purpose of this federal services oversight commission is to address one of the key lessons of the financial crisis. that absence of any one entity to monitor and address chorused. the financial system, one of the greatest weaknesses of the status " from work in our view -- of the status quo for more in our view is they often work in silos and compete with each
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other and a race to the bottom. one of the main purposes of this commission is to require cooperation and information sharing so there are no gaps in the regulatory oversight. where is the -- the house has offered to strike all of this at the outset. tidal 8 requires, in our view, tight regulations. these financial market utilities provide critical post-trade payment, clearing, and some and services to the u.s. financial system. they form the plumbing of our broader economy, including the settlement of government securities, foreign exchange, corporate municipal securities, and derivatives. the fmu's includes central counterparties for derivatives including the chicago mercantile
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exchange, foreign exchange summit services, central security depositors, such as the depository trust co., and derivatives trade depositories, such as warehouse trust. they did not include exchanges and other training venues -- trading venues. there are no safety valves in place if they're not able to perform their settlement and payment functions due to the extraordinary events such as terrorist and senses, cyber attacks, a technical malfunction, natural disasters, and other crises. consistent with the goals in other areas, title 8 would authorize the financial stability oversight house to designate fmu's as systemically important and subject to tougher regulation. there would be no car bouts for these large financial entities that handled billions of contracts each day.
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title 9 would allow stronger regulation and complement existing supervision by agencies such as the ftc, cftc, and bank regulators. it would eliminate the fragment regulation of fmu's by requiring them to identify the risks. title 8 would create safeguards for fmu's that run into extraordinary liquidity problems brought on by terrorist incidents. title 8 would provide access to temporary secure credit from the fed said that fmu's can secure payments and as an emergency circumstances. title 8 but also ensure robust
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mandatory standards, manager systemic risk across all systemically import market utilities, and strengthen, we believe, the examination of this critical systems. title 8 would bring a payment, clearing, and settlement functions in line with international standards as well. currently, all g-10 central banks around the world except the u.s. federal reserve have some form of statutory responsibility of fourth of pcs oversight. all of them other than the federal reserve also have the ability to offer accounts and settlement services to non-banks fmu's. title 8 would give the fed is set -- similar authority which would allow them to manage their setup -- settlement process cheese and a safe and sound manner. central bank oversight of these functions is, threat the largest economies because the role that central banks play as the settlement bank to the nation's banking system. the fact that payment clearing
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and summit utilities have not been a source of systemic problems to date is no guarantee of continued strong performance, as markets continue to grow and congress encourages the greater use of central clearing, the financial system will be increasingly reliant on the performance, integrity, and soundness of the of pcs systems. for all of these reasons, we believe that the ouse offer to strike title 8 should be respected -- should be rejected, respectfully. i am concerned that continuing the status quo, fragment regulation of the systemically important companies, could leave our financial system vulnerable to unforeseen problems again. carving out fmu's from regulation would be inconsistent with the heightened standards that we are applying to other
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large financial institutions in the course of the two bills. with fmu access to temporary, secure, emergency facilities, our financial system would be in danger in the face of crises and national security threats. excluding the federal reserve from the regulatory role of these entities would keep the united states out of sight with the world -- out of synch with the world's largest economies. i failed to mention in the first part of these remarks, let me go back and mentioned earlier, i was talking about how fmu's the with the various diversity within the financial systems within but chicago merc as well as banks and derivative trade depositories. credit, liquidity, and operational dependencies exist among fmu's. therefore, risk is spread across them and other financial institutions. millions of complex contracts
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worth billions of dollars go through these fmu's every single day. despite the potential for systemic risk in the fmu's, the current regulatory structure for them is fragmented. the majority of the largest fmu's are currently regulated by the fed, the sec, and the new york state banking regulator. by the's are regulated cftc. the options clearing corp. is regulated by both the fcc. the sec and cftc. no single regulator in our view has the ability to see the risks that may arise across the system because of fmu activity. there is no required coordination between agencies that have a role in overseeing fmu's. there are no consistent risk- management standards. if regulators provide different standards, as we have all painfully learned, leaving gaps in the regulation. again, i say to my colleagues, i
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think this is an important area. i know the house has rejected having title 8, but i would say, and again i'm hesitant to say this because you have to hear from the other members, this is one of these areas where we have a lot of consensus. so we would like to work out with our house counterparts an area that we think it's critically important. i have taken a long time and i apologize going through all that. i see mike warner, my friend from virginia, is here. -- i see mark warner, my friend from virginia, is here. you have been so instrumental, along with bob corker, in this, and of course blachly and worked tirelessly on this as well. -- and blanche lincoln worked tirelessly on this as well. >> thank you, mr. chairman. i apologize for the other members jumping in on the middle of this, but it turns out asked me to come back over and share
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some thoughts on title 1 and 2. i think we spent literally hundreds of hours trying to fashion appropriate titles for systemic risk resolution, ending too big to fail. while both of us feel that the original project that amended in the process, i'm still quite proud of the work. the most bipartisan part of the senate bill are title 1 and 2, which was later amended by the dog-shelby amendment, which got the votes. -- by the dodd-shall the amendment. one of the import distinctions i think between house and senate bill is on the role offthe
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systemic risk council and the role of the members including the federal reserve. i think we have to recognize that each of the members of the council bring particular expertise to the table. the house approach, which allows the federal reserve to set the newer standards around systemic risk, slightly different approach. basically leaving the individual agencies to work on it systemic risk, setting standards for additional capital, additional liquidity. two new important parts are contingent capital, which is a new concept. it will have to be worked out, but the notion of debt that would convert to equity if an institution got close to the line in terms of being on a downward spiral. we also put in place a requirement for the funeral
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plans and required that these funeral plans -- with an assumption the systemically important institutions would have to show how they could unwind themselves through bankruptcy. that is potentially an important tool. clearly the individual members will have to sign off on these plans, have to show that no longer should an extraordinarily large institution not be able to unwind itself through bankruptcy. if they cannot, the agency can unwind these institutions. we think this approach, which requires the agency's to respond to the suggestions of the council and defend were they not take up these, makes more sense than leaving the responsibility with the federal reserve. we also think one of the areas, about which institutions would be included as systemically
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important, we want to put a high hurdle in place so that non- financial institutions cannot be included in the systemic risk oversight responsibility, including a very important provision, senator corker came up, the hotel california provision to make sure that if any of these large institutions lost or decided to get rid of their bank charter, that would not allow them to fall outside of the gambit of the systemic risk council. we put i think of. . only financial institutions could be. -- wheat but i think import restrictions on ensuring that all the financial institutions could be covered. we were very concerned in the house bill of creating a special designation of a systemically important firm, in that might defer to the market or others that this firm would receive special status.
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the way at least i have read your approach is there would be an effective cliff effect. firms to be identified as important. with a different approach that says any firm that has assets, financial firm that has assets, banks over $50 million, there is a higher standard of supervision, but it would not affect be a cliff effect but it would be a graduate it affect as we added additional capital requirements, leverage requirements, the standards to be used in terms of the funeral plans and the stand is for the contingent capital. we think this approach, which is more of a stairstep, would not create perhaps some of the unforeseen consequences that would take place if there was out and out designation of systemically important firms. to reemphasize, we wanted to make sure with his hotel california provision that a
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bank, by changing its charter, could not relieve itself of its obligations. another area that senator corker and senator reid worked on, and i, that i do believe is in the house bill, this is the creation of the office of financial research. there's been some misunderstanding about this office. i know some of my colleagues think this office's power would go too deeply into individuals personal financial status. that is absolutely not the case. this is the inability to have an independent outside of any regulatory body that could collect on virtually every time basis -- a real time basis the status of all the transactions are institutions had. i think one of the things that became evident was that nobody knew the status of aig's enormous number of contracts and to the counterparties war until it was too late. we would create this independent
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entity that would report to the systemic risk council that would have that real time daily basis and an important independent toll that i think adds value. on title 2, again, i think the senate bill creates a more realistic and workable solution. at lot of debate has been around funding. i am sure senator corker has enumerated on these, but we start with three or four principles. one, we wanted to make sure that never again with the american people have to hear that a company is too big to fail. two, we wanted to be able to unwind any institution, but wanted to start with a strong presumption towards bankruptcy. bankruptcy should always be the preferred route, and we wanted to put appropriate hurdles in place -- some of those got to cannot -- appropriate hurdle so that resolution would only
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become an act of flat steel results. and the resolution would be towards receivership, not conservatorship. so no rational management team would ever prefer resolution. ego a resolution, you are going out of business, -- you go into resolution, you are going out of business, the management his toes, the company is toast, and the shareholders are toast. we tried to strike that balance. we start with $25 billion, to try to give a little bit of time so that regulators could make an assessment of how much unencumbered assets were left in the systemically import firm thatthad to be put through resolution if bankruptcy did not work. some thought that even small fund could create the appearance
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of a bailout fund. i think senator corker and i, i do want to put words in his mouth, but some of us were somewhat agnostic about whether it is pre-funded or post-funded, but a number of colleagues thought post-funding would be better. that borrowing capacity would be constrained by the analysis that would be made basically of what an unencumbered assets remain in that fund, and then it would take a hair cut from that, 90% of on incumbered assets. we frankly thing this approach puts some parameters about resolution ability. we think it insurers there will be paid back as the assets of this institution are liquidated so the taxpayers are protected. and in the event that those funds are not fully paid back, they're as -- there is an
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ability to go back and charged with interest, they those other systemically important firms. there is a guarantee that taxpayers will not be exposed. clearly, this is a process that the fdic is familiar with, used it on smaller institutions. they have that ability to make those assessments. we think this is a better approach than the house approach, which sets an arbitrary market out there. our concern was a could appear to large and too easy to go after, or, in certain cases, too small, in the event of the crisis we saw last time. without placing an arbitrary number was not a good approach, and the 90% of all unencumbered assets was a good approach. >> i don't to cut you off. >> i will finish with that point. i will be happy with answering questions. trying to strike the balance to
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make sure that we put inappropriate protection, appropriate speed bumps for systemically large institutions, with a preference towards bankruptcy, but then in the eventuality that the resolution had to be used, we think that we struck a better balance. as the conversation goes on, i would be happy to lend my two cents. >> senator at lincoln. >> thank you, mr. chairman. i just want to say to the chairman i appreciate working with the staff and others on the senate on some of the concerns that we had on the first couple of titles, and appreciate all the help and good work that we did with those. i would like to express significant concern with title 8, which covers the payment settlement and clearing. i would like to associate myself with the comments of my good friend and counterpart on the house side, chairman petersen, earlier today.
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clearing is extremely important to the derivatives title. it is a relatively unglamorous but incredibly important plumbing parked that creates -- plumbing parts that creates reliance. the cftc and sec have regulated clearing houses for decades without any problem so far, and it leads us to believe if it is not broke, don't try to fix it. i have real concerns in what might come out of there. i was pleased to see what the house did, actually, but am more than willing to work with the chairman and the senate members here to come up with whatever common ground we might found. i am always looking for common ground, and i appreciate chairman dodd and others willing to find common ground. we look forward to working through the weekend with that. as the title 8 provisions
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involved in clearing seem to be a solution in search of a problem, i hope that we will look seriously at not trying to create more issues. the cftc and sec have done a good job on a clearing. that does not seem to be a big need for the fed to get involved, especially since they have new and significant responsibilities, and for that reason, and several others, i hope that we will look at how we can come about the middle ground that we can work on and is amenable to the house. i associate myself with chairman petersen, and will continue to work with german dog and his staff and others to see if there's common ground be found -- and to work with chairman dodd and his staff to see if there is common ground to be found. >> mr. chairman, i appreciate your lengthy and telling statement earlier. i like to associate myself. i have observations involving resolution of 40 and systemic
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risk. senator dodd and i resolved concerns about government bailouts and prior versions of the senate bill to prevent future bailouts. we tightened up language in the senate bill regarding debt guarantees. any such guarantees, as you recall, require congressional approval. the government will not be allowed to prop up failing firms. we removed the government slush fund because of the moral hazard issues that arise if markets believe such funds exist. beyond the moral hazard, the pre-fund takes money out of the banking system and places it in treasury securities. i understand that members of the house got a better cbo score, that is not a drop consideration. senator dodd and i tighten the language regarding systemically risky institutions and their activities.
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i believe the fdic is not allowed to pay more to creditors that would otherwise receive in their proxy. this avoids favorable treatment of select creditors like goldman sachs. while we have made it many improvements in the senate text, my preference and best of all worlds would have been the bankruptcy code and the rule of law to resolve failing firms. i think this is a big improvement over where we started, and i intend to support that and support the chairman. i would also like to say a word or two about title 8. house offer to striped title 8 i don't think it is -- to strike title 8 i don't think is inappropriate. i don't believe we could have an effective derivatives title if we don't have effective payment, clearing, and settlement title. unfortunately, the careless way
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this was written makes it very unlikely regulators from clearing houses will be rushing to get this cleared before the risk is fully understood and without regard to whether the clearing houses can handle the load. the risk oversight role for the federal reserve and discount window access for clearing houses in the event of liquidity crunch will be important to assure the stability of our financial system. i understand that title 8 needs a lot of work. is drafted so broadly that it could reach a virtually unlimited range of entities and activities, and i think we need to fix title 8 so it contributes to the stability of our financial system. thank you, mr. chairman. >> thank you. >> thank you, mr. chair. quickly, i like to express concerns about title 8, also. it would give fairly broad
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powers to the financial stability oversight council to identify a systemically support financial market utilities, payment clearing, or settlement activities, and give the federal reserve board of governors the authority to further regulate these activities. i am specifically concerned about the real possibility and maybe probability of the overlapping authority being granted to the fed resulting in inconsistent or duplicative regulation applied to the clearing houses that are already regulated by the sec and cftc. with regard to a clearing house is regulated by the cftc, i think we ave a good principle- based regulatory structure in place. it has worked well and the clearing houses have regulatory certainty of knowing they are responsible for complying with the core principles of the commodity exchange act. too bad a subsequent letter of regulation on top of this would defeat the spirit and punctuality of the corn-based
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principal regulation -- the core based principal regulation of the clearing houses. i'')m somewhat sympathetic to chairman bernanke's concerns about banks participating in clearinghouses and the need for proper system what surveillance. however, i don't think giving the fed authority that would create uncertainty and possibly inconsistent regulation is the right way to go. i think this whole issue warrants additional review and i think the chairman -- i think the german for taking it under advisement. as far as i could tell, chairman petersen is the only chairman to hold a hearing on this issue. given how important is to have properly functioning clearing house is, we need to get it right. i understand the cftc chairman has proposed changes to the senate title 8. i hope both the administration and this conference would get together on this issue, because it truly is critical that we get
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it right. mr. chairman, you have been very fair and open on this, and i appreciate you taking it under consideration and having significant impact of the next couple days to get this right. >> thank you, senator. >> i think clearing platforms are a critical part of this legislation. but they are contained inherently and systemic risk. the notional value of ttese clearing platforms reaching millions of portfolios of dollars. one of the meeting but as of the clearing. form is to establish a margin collateral requirements. if they get it wrong, it could be a tremendous problem for the system. the clearing platform also underlies all the train platforms. we are essentially requiring more complicated over-the- counter derivatives to be cleared and a subset of those to be traded, all of this assuming
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it an effective clearing platform, well-run and well organized. more than that, in terms of federal reserve supervision, the legislation in title 8 recognizes in case of a market disruption, the federal reserve will have the responsibility of providing liquidity. i think if we separate the function of providing liquidity from the function of providing oversight so they can insure these disruptions are minimized, we're making a fundamental error. i think they go hand in hand. i think it is consistent oversight of the platforms by the fed, in conjunction with the functional regulators, secc cftc, makes sense, particularly if the fed will be the source of liquidity if there is a disruption. i think in the context of the last several years, there's a strong presumption that disruptions are caused by
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banality, greed, and the forces of human nature. but there are possibilities of natural disaster, possibilities of terrorist attacks. in this context, possiblities of cyber attacks against these critical financial utilities, which could render them inoperable, requiring the fed to step up. unless we have this provision for emergency, together with oversight, we could find ourselves, not because of the human factor but because of these other factors, in a very serious situation. i would support the chairman's comments and also senator shelby's comments with respect for the need of title 8 and a strong title 8. >> homeless there are any further comments, i will turn to the center -- unless there are any further comments, i will turn to the senator. we have a vote that is beginning. we may have to come back. if we do, that is fine.
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>> senator, you could finish. i like to make a brief comment in response to -- >> let me get this done over here, barney. >> thank you, mr. chairman. my amendment is to title 1, and i make a motion that we change the senate counteroffer to accept the house grandfathering of holding capital. the reason for that is there are significant unattended consequences of disallowing about $177 billion of bank holding company capitol on day one. this reduction will have serious unintended consequences of restricting banks' lending to consumers and small businesses. one of the reasons for the problem is the common form of this capital at issue here, the trust's preferred securities, typically has a 90-day call.
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a provision will effectively force the change of law. hundreds of companies will redeem billions of dollars worst -- worth of trust preferred securities, competing for capital and driving up the cost of capital for everybody, with the unintended consequences that we will reduce the ability of capital for small businesses and banks. as was said earlier today on the house side, this will have unintended consequence of driving a number of banks into -- out of business, unintended and not necessary. i believe the senate should not reject the house amendment. >> this is the proposal senator collins cares deeply about. we have been waking. working with her. i know that senator corker made the amendment. i will urge the rejection of the
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amendment. we are at a point now, senator collins -- [in all double] the house bill had 15. i was hoping we could strike a compromise between the two, which could delay some of these. i don't want to delay the debate on this without the chance to vote on this. i like to see us defend the collins amendment as we go forward and negotiate with their house colleagues on this matter. unless there is further debate on the matter, will calvo? -- roll-call vote? we asked the clerk to call the roll. [roll-call vote]
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[captions copyright national cable satellite corp. 2010] >> we will pause one second here, clerk. i want to make sure our colleague from york is properly recorded -- from new york is
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properly recorded. reality tv here.
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[captioning performed by national captioning institute] we have about four or five other amendments. we will come back to complete our work on these titles. yeah. >> mr. chairman, we just have one vote. >> yeah. if you guys want to head off and get the vote, i will get the vote.
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>> boy, the senate really ties things up for a long time. [laughter] >> you have a lot of moxie. i have been sitting here for hours on end. >> why you are waiting, but to make a general comment in
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response to where we are going on the offer. receiving these. obviously, we will be responding on tuesday. i also want to announce the agenda for tuesday. >> we will meet. >> we will meet in the senate. the senate tuesday, we will switch back and forth. the agenda for tuesday its consumer protection agency, predatory lending, risk retention, interchange fees, and access to banking service issues. that is tuesday. where are we meeting? do we have the address? >> i think it is 106. >> 106. we will have some responses. we have several titles. first of all, we will respond,
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but i have kind of a procedural comment. the senate is a different place. >> really? [laughter] >> it is one of the few places where we are told agreements reached are unassailable, even when some f the people who reach them vote against the bill. it is an interesting concept. we are told we have a bipartisan agreement, which got off to a partisan vote, and i am perplexed by the untouchability of the people who voted no. understand the senate has the rules and we need to get to 60, but the fact there was an agreement in the senate among senators is not binding on us. i hope people understand that. on the merits we will look at these things, and i appreciate the senate works hard, and we kind of fool around, but we came
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up with something, and i want to say on some of these issues, there are serious issues. the role of the state insurance commission. i don't think they can be or should be lightly dismissed. on the question of the definition of financial companies, we want some anti- evasion procedures. i hope there is some room for compromise on that, because you could have companies that are substantially financial, and the problem is if we are too rigid in what was said board, we invite people to be creative and avoiding it. i think some capacity there is necessary. on the office of financial data collection, it was inadvertent. we met to agree to that. that one was an inadvertent. i like to say on the question, the definition of a financial company, we think there is the
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possibility of an invasion if you make the definition too rigid. >> can i interrupt? senator schumer votes no. >> mr. schumer votes no by proxy. it is a tie vote, and the measure is not passed. >> mr. chairman, i like to say it was bipartisan agreement on some titles. there are numbers of titles. >> it was bipartisan agreement that resulted in partisan vote. when people vote against a whole bill, to me, the fact they were in a bipartisan agreement is hardly conclusive that we should not look at the substance. >> we have a bicameral system. >> i understand that, senator, but it is a genuine bicameral solution, so an agreement made
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in the senate with people who vote against the bill, a lottto make it clear it is not binding on us here. >> we knew that. >> thank you.
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[captions copyright national cable satellite corp. 2010]
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>> a break in the action here as house and senate conferees work on amendments to the financial regulation bill. this is the fourth day, this morning at 11:00 a.m. these conference meetings are met to merge the house and senate versions of the regulations bill. members are expected to continue work into next week, working section by section through the legislation. we will bring you live coverage of these meetings. by the way, you can find all four meetings held so far anytime on our website, c- we will continue to look in the meeting room. the senate is in a vote right now, and we will see what happens as that vote in the senate wraps up, the see if they
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will continue here. you're watching live coverage on c-span.
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house and senate conferees have been working on amendments to the financial regulations bill. this is the fourth day of meetings. this is meant to merge the house and senate versions of the meeting. it will work into next week, working by section, and will
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have live coverage of the house and senate financial regulations conference when it continues, as members return. on our website,, you can find all four meetings of the committee. house minority leader john boehner today distanced himself by remarks by energy committee member joe barton, who called president obama's meeting with bp executives a "shakedown," in reference to the agreement by bp to set up a $20 billion fund for damages from the gulf oil spill. he also talked about a measure introduced by democrats that would require greater disclosure by outside groups spending money on political campaigns. this is 10 minutes. >> we are squarely focused on
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stopping this week, cleaning up the mess, and finding out what went wrong. i don't think president obama should exploit this crisis by imposing a national energy tax on families and small businesses. both parties should be working together to craft responsible solutions to this disaster. there is nothing irresponsible about a national energy tax that would raise -- there is nothing responsible about a national energy tax that would raise taxes and ship jobs overseas. this bill was left dead for reason. remember, what obama is chief of staff said, "you never want a serious crisis to go to waste." when health care costs were exploding, president obama said the passage of government takeover, what else? now what is happening? there are exploding at a faster rate. when our economy was losing millions of jobs, president
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obama said pass this trillion dollars stimulus plan or else. now millions more have lost their jobs and unemployment is still near 10%. president obama has so far over- reached and lost the confidence of the american people. that is why the white house wants democrats to vote on this national energy tax after the election. that way they can circumvent the american people, circumvent the elections with one more costly act of defiance on their way out the door. i think every house democrats should tell their constituents right now whether they support this national energy tax now or after the election. the president's watch, the democrats have become spend- aholics who cannot restrain themselves. no price tag is too high for the democrats and now we are all
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paying the price. democrats are now on the verge of giving up on passing a budget, and this would be the first time in the modern era of the house has failed to pass a budget. listen, democrats have lost every shred of credibility when it comes to managing taxpayer dollars. irresolution is no substitute for a real budget -- a resolution is no substitute for real budget that is needed to boost jobs and get our economy going again. just when i thought democrats were about to commit an act of legislating, they're holding up a critical funding bill. for what? tens of billions of more dollars for their failed stimulus spending. but secretary of defense said yesterday that congress's the failure to pass the supplemental by july 4 would disrupt our troops that are in harm's way.
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i think the fact that democrats are holding our troops hostage, to justify their spending, is wrong. we have to stop playing games with our men and women in the field and pass this war supplemental now. today, republicans held a forum through america speaking out, to hear from experts about how the new health care lot is crushing job creation in america. one idea discussed was the proposal to repeal the job- is at the heart of this new law. this week, we successfully forced a vote on the house floor to repeal this individual mandate. the provision is so controversial that 20 states and the nation's leading small- business organization have joined together to try and overturn it. but unfortunately, democrats once again voted to side with
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speaker pelosi said of their constituents. republicans are listening to the american people and will hold democrats responsible for this job-killing health care law. with that, i will take your questions. >> this morning, representative barton supposed to bp executive tony award, saying the white house had given a shakedown to the company with escrow fund. you agree with this? >> i have said since the beginning that bp ought to be held responsible for every dime of this tragedy. they ought to be held accountable to stop the leak and get it cleaned up as soon as possible e. >> as the white house been unfair in this treatment? >> bp agreed to fund the cost of the cleanup from the beginning. >> do you disagree with the categorization? >> i do. >> we have heard other present
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-- republicans say the president is exploiting the oil crisis to pass the climate cap and trade bill. is that the case? d.c. this as a mirror of some of the machen nation's -- the you see this as a matter of some of the massive nation's, a common thread? these are big legislative ticket items. >> i think the health care law was one of the worst legislating -- legislative abominations' i have seen. i have never seen a bill that the american people know about, the american people had discussed, debated, and the american people voted. they did not want any part of this bill. yet they saw congress shut down their throat. i don't think that can happen when it comes to a national energy tax. while that bill passed the house, i can tell you if you brought that bill backing from brought that bill backing from of the house today,


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