S5960 CONGRESSIONAL RECORD — SENATE August 2, 2012 

Here is how it works. 

LIBOR is calculated for 10 currencies 

and 15 maturities. For example, one of 

the most important LIBOR rates is the 

3-month dollar LIBOR. 

A select panel of 18 major banks report how much they believe it would 

cost to borrow money in dollars for 3 

months at 11 a.m. on a particular day. 

The top four estimates and bottom 

four estimates are discarded, and the 

remaining rates are averaged to calculate LIBOR. LIBOR is published 

every day at 11 a.m., and companies 

across the world use this rate to set interest rates for consumers. 

So why would the major banks want 

to manipulate LIBOR? 

The simple answer is profit. And 

greed. 

Many of the major banks that help 

set LIBOR stand to lose or gain millions of dollars each day based on the 

smallest change in LIBOR. 

As the leading trader of derivatives 

in 2007, it has been estimated that 

Barclays stood to lose or gain $40 million per day. 

The settlement between regulators 

and Barclays lays bare a scenario 

where traders not only regularly attempted to manipulate LIBOR, but 

they didn’t even try to hide it. 

Once the financial crisis hit in 2008, 

manipulating LIBOR was also about 

survival. 

Banks were under intense scrutiny. If 

it cost a bank more to borrow money, 

it could be an indicator that other 

banks thought lending to the bank was 

risky. 

In Barclays’ settlement with regulators the bank admitted that it underreported the cost of borrowing during 

the financial crisis to mislead regulators and the public about the true financial health of the firm. 

Unfortunately, it seems as if the 

Barclays settlement is just the tip of 

the iceberg. 

Lawsuits worth billions of dollars 

have been filed against banks alleging 

wrongdoing. Regulators in the U.S., 

Canada, Japan, EU, Switzerland, and 

Britain are reportedly investigating. 

U.S. regulators should be fully engaged in investigating the LIBOR process and any wrongdoing by U.S. banks. 

However, U.S. financial regulators 

can’t conduct the necessary investigations into claims of wrongdoing or enforce new laws meant to rein in Wall 

Street if they don’t have the people, 

software, and resources necessary to do 

the work. 

Congress passed Wall Street reform 

because the largest financial institutions in this country took advantage of 

loopholes and the unregulated swap 

markets. 

They drove our country into the 

worst economic recession in our lifetime. 

In the aftermath, we said we are not 

going down that road again. No more 

too big to fail, no more bailouts. We 

are going to have transparency and accountability when it comes to swaps. 

We gave the job to the Commodity 

Futures Trading Commission and the 

Securities and Exchange Commission. 

With the recent approval of final 

rules defining swaps, the CFTC and the 

SEC have now triggered the implementation of an array of other rules to finally bring the swaps market out of 

the shadows and into the light. 

This is a huge step forward. 

But now, just when the financial regulators have the rules in place to oversee the $300 trillion market that nearly 

destroyed our economy, the Republicans are trying to cut the agencies off 

at the knees. 

Their philosophy is if you can’t repeal reforms by passing legislation, 

you can undermine the agency’s ability 

to enforce the law. 

Let me put this in perspective. The 

$37 trillion futures market has historically been policed by the CFTC. That is 

an enormous market to oversee, by 

anyone’s calculation. 

But it pales in comparison to the 

complex and previously unregulated 

$300 trillion swaps market now under 

CFTC’s purview because of DoddFrank. That is eight times the size of 

the futures markets. 

Common sense tells you that it is impossible for an agency to increase its 

responsibility eight-fold while its resources are cut by 41 percent. 

Yet, that hasn’t stopped the Republicans in the House. They recently reported out of Committee a bill that 

cuts funding requested in the President’s fiscal 2013 budget by $195 million 

for the SEC and $128 million for the 

CFTC. 

That’s a 41 percent cut for the CFTC 

and a 12 percent cut for the SEC—from 

the President’s request. 

Keep in mind that while Congress 

sets the level of funding for the SEC, it 

is largely funded through fees on trading volumes. So the cuts to the SEC 

aren’t about concern for saving taxpayer dollars—it is simply a way to remove the regulators’ ability to properly function. 

When financial tragedies befall people—think of missing customer funds 

at MF Global or Peregrine—we want 

investigators to find out what happened and seek recovery of money to 

the families and farmers who trusted 

those companies. Those are the jobs 

the Republicans want to cut. 

This tells firms such as Peregrine 

that while we have laws on the books 

they must follow, we aren’t going to 

give the regulators the resources to enforce them. 

The funding levels for the CFTC and 

SEC reported out of the House promises we will face another situation like 

MF Global or Peregrine in the future 

because we won’t have enough cops on 

the beat. 

A mere 4 years after the worst financial crisis in our lifetime and just several weeks after the latest scandal 

where farmers lost their hard earned 

money, this is simply irresponsible. 

We are still struggling to dig our way 

out of a recession that resulted in millions of jobs lost and $17 trillion of lost 

retirement, personal and household 

wealth. 

Yet, instead of working together to 

ensure that never happens again, Republicans are doing everything they 

can to stop the regulators from implementing laws that would have prevented that crisis and could prevent 

the next crisis. 

f 

DODD-FRANK ANNIVERSARY 

Mr. DURBIN. Mr. President, on July 

21, we marked the 2-year anniversary 

of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act. 

This landmark law has taken important steps to rein in the Wall Street 

abuses that nearly drove our economy 

off the cliff in 2008. 

Two of its reforms were particularly 

important to me. One was the creation 

of the Consumer Financial Protection 

Bureau- the only agency in the Federal 

Government solely dedicated to looking out for consumers’ financial interests. 

This agency has already been a gamechanger when it comes to curbing the 

tricks in consumer financial products. 

It is bringing transparency and fairness 

to mortgages, private student loans, 

and credit cards. 

Last week, the CFPB announced its 

first ever enforcement action. It directed Capital One to pay about $150 

million to more than 2 million consumers who had purchased deceptively 

marketed add-on products to their 

credit cards. 

This is a big step forward. It shows 

there is a real cop on the beat when it 

comes to consumer protection. 

I am proud of what this agency has 

accomplished so far, and I look forward 

to seeing it continue its important 

work for years to come. 

Another important provision in the 

Wall Street Reform bill was the provision I drafted to reform debit card 

swipe fees. 

The swipe fee is a fee that a bank receives from a merchant when the merchant accepts a credit or debit card 

that the bank issued. This fee is taken 

as a cut of the transaction amount. 

Now, the vast majority of bank fees 

are set in a transparent and competitive market environment, with each 

bank setting their own fee rate and 

competing over them. That is not the 

case with swipe fees. 

With swipe fees, the big banks decided they would designate the two 

giant card companies, Visa and 

MasterCard, to set fees for all of them. 

That way each bank could get the same 

high fee on a card transaction without 

having to worry about competition. 

And swipe fees are anything but 

transparent. Most consumers and even 

most merchants have no idea what 

kind of swipe fee is being charged when 

they use a debit or credit card. 

The swipe fee system became an 

enormous money-maker for Visa, 

MasterCard, and the banks. They were 


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August 2, 2012 CONGRESSIONAL RECORD — SENATE S5961 

collecting an estimated $16 billion in 

debit swipe fees and $30 billion in credit 

fees each year. 

Those billions are paid by every merchant, charity, university, and government agency that accepts payment by 

card, and the costs are passed on to 

American consumers in the form of 

higher prices. 

By 2010, the U.S. swipe fee system 

was growing out of control with no end 

in sight. U.S. swipe fee rates had become the highest in the world- far exceeding the actual costs of conducting 

a debit or credit transaction. 

And there were no market forces 

serving to keep fees at a reasonable 

level. Merchants and their customers 

were being forced to subsidize billions 

in windfall fees to the big banks. 

I stepped in and introduced an 

amendment to the Wall Street reform 

bill that for the first time placed reasonable regulation over debit swipe 

fees. 

My amendment said that if the Nation’s biggest banks are going to let 

Visa and MasterCard fix swipe fee rates 

for them, then the rates must be reasonable and proportional to the cost of 

processing a transaction. No more unreasonably high debit swipe fees for big 

banks. 

The regulatory steps that my amendment proposed were modest. Most 

other countries have gone much further in regulating swipe fees. 

But the banks and the card companies screamed bloody murder. 

My amendment passed the Senate 

with 64 votes, and it was signed into 

law with the rest of Wall Street reform. And the swipe fee reforms took 

effect last October. 

As it turns out, debit swipe fee reform is working pretty well. 

So far, reform has led to an estimated $7 to $8 billion in annual debit 

swipe fee savings for merchants. 

That savings is a real shot in the arm 

for American businesses that have been 

crushed by ever-rising swipe fees. 

Consumers are also benefiting as savings are passed along from merchants 

through competition. 

After reform took effect in October, 

we saw a massive level of retailer discounting that extended beyond the 

usual holiday season discounts. 

And according to a USA TODAY article from May 11, a number of individual 

merchants are offering debit card discounts for items such as gas, furniture, 

and clothing. This trend is expected to 

continue and to grow. 

Furthermore, the banking industry 

had claimed that small banks and credit unions would be hurt by debit swipe 

reform- even though all institutions 

under $10 billion in assets were exempted from fee regulation. 

As it turns out, small banks and 

credit unions have thrived since reform 

took effect. 

Why? Because under my amendment, 

small banks and credit unions can continue to receive the same high interchange rates from Visa and MasterCard 

far higher than the rates that their big 

bank competitors receive. 

In May, the Federal Reserve confirmed that exempted banks and credit 

unions were receiving the same average 

interchange rates they had gotten before reform. 

The American Banker newspaper has 

noted that the ‘‘Small Banks’ Durbin 

Shield Worked’’ and prominent card industry analyst Andrew Kahr noted that 

the ‘‘Durbin Doomsday Never Came.’’ 

Credit unions in particular are doing 

well after swipe reform. Last year 1.3 

million Americans opened new credit 

union accounts, up from about 600,000 

the year before. And credit unions now 

have a record number of members- almost 92 million overall. 

Now, it is important to note that 

there should be even more savings from 

swipe fee reform to merchants and consumers. 

When the Federal Reserve was writing its final rule, the banks lobbied 

them to weaken the final rule and raise 

the debit swipe cap from 12 to 24 cents. 

Then Visa and MasterCard promptly 

jacked up any swipe fee rates that were 

below 24 cents so that this 24 cent ceiling became a floor. 

Basically, the banks and card companies lobbied the Fed for a loophole, and 

when they got one, they ran through it. 

This needs to be fixed going forward, 

and I am confident it will be fixed. 

The bottom line, though, is that the 

swipe fee reform that Congress enacted 

in 2010 has gotten off to a good start. It 

is working, and it is laying a solid 

foundation for further reforms to improve the credit and debit systems. 

I am afraid, however, that while 

swipe fee reform has made important 

strides in Congress, the big banks and 

card companies are trying to undercut 

that reform in the courts. 

Recently a proposed settlement was 

announced in a long-running class action lawsuit. This lawsuit had been 

filed back in 2005 by a number of merchants against Visa, MasterCard, and 

the big banks that issue most of their 

credit cards. 

The lawsuit was over credit card 

interchange fees and the associated 

rules that Visa and MasterCard impose 

on merchants. The suit alleged that 

these fees and rules violate the antitrust laws in the way that they are set. 

This lawsuit had the potential to 

bring about important changes to the 

credit card system that would have 

promoted transparency, enhanced competition, and helped consumers. 

But the proposed settlement does not 

do that. In fact, I believe this proposed 

settlement represents a capitulation to 

the Wall Street banks and credit card 

giants. It is a sweetheart deal for them 

and a bad deal for merchants and for 

consumers. 

The settlement was negotiated in secret between Visa, MasterCard, the big 

banks, and the attorneys representing 

a small number of merchants. The vast 

majority of merchants had no idea 

what was in the proposed settlement 

until it was unveiled. 

The terms of the settlement include 

a $6 billion dollar payout from Visa, 

MasterCard and the banks to the plaintiff merchants. That is a large number 

it is nearly twice as much as the previous record payout in an antitrust 

case. And it is a clear sign that the 

card companies knew that their fees 

were unreasonably high. 

But, $6 billion is only 2 months worth 

of credit card interchange fees. And the 

settlement does not prevent Visa and 

MasterCard from simply jacking up 

their fees even higher than before. 

The settlement does nothing to 

change the anticompetitive fee-fixing 

that Visa and MasterCard do on behalf 

of their member banks. In fact, it gives 

Visa and MasterCard broad and permanent legal immunity to continue doing 

exactly that in the future. 

Also, the settlement not only binds 

the merchants who are parties to it, 

but it also binds every single American 

merchant, charity, university, and 

State or local agency that accepts a 

Visa or a MasterCard today or in the 

future. 

It bars all of them from ever bringing 

a legal claim in the future against 

Visa, MasterCard, or the big banks relating to any swipe fee, other merchant 

fee, or network rule, no matter how unfair or unreasonable the fees or rules 

may be. 

And this settlement gives Visa and 

MasterCard legal immunity not just 

for credit cards, but also for debit 

cards, and prepaid cards and mobile 

payment systems. 

The extent of the free pass Visa and 

MasterCard would get under this proposed settlement is breathtaking. No 

wonder the banks and cards were so 

quick to come out in favor of this settlement. And no wonder Visa’s stock 

hit an alltime high the next business 

day. 

Now, the proposed settlement would 

make some temporary changes to 

Visa’s and MasterCard’s rules. But in 

my view, these proposed changes will 

be ineffective in reining in Visa and 

MasterCard’s unreasonable fees. 

The bottom line is that this proposed 

settlement does not make our credit 

card system better. 

Instead, it gives Visa and MasterCard 

free reign to carry on their anticompetitive swipe fee system with no 

real constraints and no legal accountability to the millions of American 

businesses that are forced to pay their 

fees. 

This is a stunning giveaway to Visa 

and MasterCard, all for a payout of a 

mere 2 months worth of swipe fees. 

This is a bad deal, but it is not a done 

deal. The merchant plaintiffs still have 

to decide if they will support it, and 

the court must approve it. Several 

plaintiffs—the National Association of 

Convenience Stores, the National Grocers Association and the National Community Pharmacists Association—have 

already rejected the deal. 

Now, I am not a party to this lawsuit, but I care deeply about making 


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S5962 CONGRESSIONAL RECORD — SENATE August 2, 2012 

the credit and debit card systems in 

this country more transparent, more 

competitive, and more fair. 

I have worked hard over the years to 

make sure that merchants and consumers do not get nickled and dimed to 

death with hidden and unreasonable 

fees from Visa and MasterCard, and we 

have made great strides. 

That is why I am speaking out about 

my concerns with this proposed settlement. I know that Visa, MasterCard, 

and the banks are thrilled with this 

settlement, but this is not a settlement 

I would agree to. 

I hope that the remaining merchant 

plaintiffs will review the proposed settlement carefully and think hard about 

whether it will be good for the future 

of our credit and debit card systems. 

They should not be anxious to sign 

away that future and settle for a bad 

deal. 

f 

TRIBUTE TO JOE MATAL 

Mr. KYL. Mr. President, I want to 

take a moment to recognize the service 

of one of my longtime legal counsels on 

the Judiciary Committee, Joe Matal. 

Joe will be leaving the Senate in a few 

weeks after 12 years of Senate service, 

and I wanted to say a few words of 

thanks. 

Joe is well-known on Capitol Hill as 

a sharp, tenacious, and principled lawyer who fights hard for principle and 

the public good. It is frankly remarkable to reflect on the breadth of issues 

where Joe has played a major role in 

his years of service, but I will list a 

few. 

Joe was intimately involved in our 

efforts to grapple with post-9/11 realities, in particular through the Military 

Commissions Act and the Detainee 

Treatment Act and the reauthorizations of the USA Patriot Act. 

Joe has been instrumental in efforts 

to ensure appropriate DNA testing of 

criminals and to ensure that the rapekit backlogs are cleared. He worked on 

the Adam Walsh Act and the Internet 

SAFETY Act. He is a go-to lawyer on 

criminal sentencing issues. Very recently, he has been an essential adviser 

on negotiations relating to the cybersecurity legislation. 

I could go on and on. Joe has worked 

on the animal crush video law I sponsored, on False Claims Act amendments, on open government laws, and 

on legal reform bills such as asbestos 

litigation reform, the Class Action 

Fairness Act, and Bankruptcy Reform. 

He is also an expert on Indian Law and 

has been an indispensable counsel on 

my work that relates to Indian Country in Arizona, but also on Indian policy nationwide. 

Finally, and most obviously, in recent years Joe has justly earned the respect of the legal and policy community nationwide as a major force in the 

development of the patent reform bill 

that Congress passed a year ago. In 

fact, when Joe leaves my office, he will 

remain in government service and 

begin work as an assistant solicitor in 

the U.S. Patent and Trademark Office. 

Joe’s service there will be essential 

given that the agency is continuing to 

implement the patent reform bill that 

Joe did so much to create. 

I would be remiss if I did not also 

note that some of Joe’s important service has been in the bills he helped ensure did not become law. Our job as 

legislators is not to jump at every 

shadow, but to exercise caution when 

others seek to rush ill-considered legislation through the body. Joe’s counsel 

and his strategic guidance have been 

essential in protecting the Nation from 

many, many bills that would have been 

contrary to good public policy. 

So I want to thank Joe and wish him 

the best as he leaves for the PTO. I also 

want to thank his wife, Maren, and his 

three children, John, Liddy, and Margaret, for supporting him in these 

years of public service. I appreciate 

Joe’s hard work and patriotic service 

and wish him the best in his new position. 

f 

CULTURE DOES MATTER 

Mr. KYL. Mr. President, Governor 

Romney suggested on a recent trip to 

Israel that the culture of a society 

plays a role in its prosperity. Some 

took offense to these remarks, and others disagreed with his premise. During 

the last few days, a debate has ensued 

about how culture promotes prosperity. 

I believe Governor Romney made an 

important point. In a National Review 

piece entitled, ‘‘Culture Does Matter,’’ 

he asks, ‘‘What exactly accounts for 

prosperity if not culture?’’ 

After all, U.S. culture emphasizes 

freedom, equality, hard work, 

meritocratic excellence, upward mobility, the rule of law, and a devotion to 

family, education, and a purpose higher 

than oneself. These cultural values, 

and others, have made America the 

world’s leading superpower—a beacon 

of prosperity, freedom, and strength. 

Millions of people have left their 

homes over the centuries to come to 

America and be part of our way of life. 

As Governor Romney writes, Israel is 

also a telling example of the role of 

culture and prosperity. Like the United 

States, Israel’s culture is based on freedom and the rule of law. He writes that 

Israel’s embrace of political and economic freedom: 

. . . has created conditions that have enabled 

innovators and entrepreneurs to make the 

desert bloom. . . . In the face of improbable 

odds, Israel today is a world leader in fields 

ranging from medicine to information technology. 

Of course other factors, such as economic policies, contribute to a country’s prosperity. But the evidence 

shows that the role of culture 

shouldn’t be marginalized or dismissed. 

I ask unanimous consent that Governor Romney’s entire article, ‘‘Culture Does Matter,’’ be printed in the 

RECORD. I urge my colleagues to read 

it. 

There being no objection, the material was ordered to be printed in the 

RECORD, as follows: 

[From the National Review Online, July 31, 

2012] 

CULTURE DOES MATTER

(By Mitt Romney) 

During my recent trip to Israel, I had suggested that the choices a society makes 

about its culture play a role in creating prosperity, and that the significant disparity between Israeli and Palestinian living standards was powerfully influenced by it. In some 

quarters, that comment became the subject 

of controversy. 

But what exactly accounts for prosperity if 

not culture? In the case of the United States, 

it is a particular kind of culture that has 

made us the greatest economic power in the 

history of the earth. Many significant features come to mind: our work ethic, our appreciation for education, our willingness to 

take risks, our commitment to honor and 

oath, our family orientation, our devotion to 

a purpose greater than ourselves, our patriotism. But one feature of our culture that 

propels the American economy stands out 

above all others: freedom. The American 

economy is fueled by freedom. Free people 

and their free enterprises are what drive our 

economic vitality. 

The Founding Fathers wrote that we are 

endowed by our Creator with the freedom to 

pursue happiness. In the America they designed, we would have economic freedom, 

just as we would have political and religious 

freedom. Here, we would not be limited by 

the circumstance of birth nor directed by the 

supposedly informed hand of government. We 

would be free to pursue happiness as we wish. 

Economic freedom is the only force that has 

consistently succeeded in lifting people out 

of poverty. It is the only principle that has 

ever created sustained prosperity. It is why 

our economy rose to rival those of the 

world’s leading powers—and has long since 

surpassed them all. 

The linkage between freedom and economic development has a universal applicability. One only has to look at the contrast 

between East and West Germany, and between North and South Korea for the 

starkest demonstrations of the meaning of 

freedom and the absence of freedom. 

Israel is also a telling example. Like the 

United States, the state of Israel has a culture that is based upon individual freedom 

and the rule of law. It is a democracy that 

has embraced liberty, both political and economic. This embrace has created conditions 

that have enabled innovators and entrepreneurs to make the desert bloom. In the 

face of improbable odds, Israel today is a 

world leader in fields ranging from medicine 

to information technology. 

As the case of Israel makes plain, building 

a free society is not a simple task. Rather, it 

is struggle demanding constant courage and 

sacrifice. Even here in the United States, 

which from our inception as a nation has 

been blessed with freedom, we faced monumental challenges in harmonizing our ideals 

with our institutions. We fought a bloody 

civil war against slavery and it took a nonviolent civil-rights movement to bring political and social equality to all Americans. In 

these epic struggles we changed our ‘‘culture’’ and vastly improved it. 

I have just returned from a trip abroad. I 

visited three lands—Israel, Poland, and 

Great Britain—which are defined by their respective struggles for freedom. I met with 

some of the greatest heroes of those struggles. I am always glad to return to American 

soil. On this occasion, I am only strengthened in my conviction that the pursuit of 


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