November 17, 2008 CONGRESSIONAL RECORD — SENATE S10549 

vote in every election that he may desire to 

participate in. 

On August 6, 1965, President Lyndon 

Johnson signed the landmark legislation—the Voting Rights Act—that 

opened the doors of democracy to all 

Americans. 

In our country’s history, yes, we have 

stumbled. But yet at each stumble, 

leaders such as Dr. Martin Luther 

King, Rosa Parks, and Cesar Chavez, 

and many others, have encouraged us 

to get up, to stand up, to move America forward. 

We, like them, believe America truly 

is an America in progress. Today, 

thanks in large measure to their work, 

we are at the dawn of a new America, 

an era in which doors of democracy and 

opportunity are open to all Americans. 

We are waiting today for the inauguration of the first African-American 

President in the history of the United 

States. That in itself is history. But 

what is also historic about this reality 

is that as President he will be President for all 325 million people of America. 

In his election, I think you see the 

statement that is truly the American 

ideal: that no matter who you are, no 

matter where you are from, anything is 

possible in this America of ours. That 

is what makes us a great nation. That 

is what we have seen as an America in 

progress which has brought us to this 

point in our Nation’s history. 

We have much work to do ahead. But 

I am very confident that America’s 

best days are still ahead, as we continue to be the beacon of hope and opportunity and human possibilities for 

the entire globe. 

Mr. President, I thank you and yield 

the floor. 

The PRESIDING OFFICER. The Senator from Maine is recognized. 

f 

THANKING THE PEOPLE OF MAINE 

Ms. COLLINS. Mr. President, since 

this is the first time I have spoken on 

the Senate floor since the elections 

have been completed, let me say I am 

very honored the people of Maine have 

chosen me to represent them in the 

Senate for another 6 years. It is a great 

honor and privilege to represent the 

great State of Maine, and I want to 

begin my remarks this afternoon by acknowledging that. 

f 

FINANCIAL REGULATION REFORM 

ACT OF 2008 

Ms. COLLINS. Mr. President, 

throughout the past few months, I have 

had the opportunity to talk to literally 

thousands of Mainers, and the No. 1 

issue that has been on their mind is the 

financial crisis, the poor state of the 

economy. 

Public confidence in our Nation’s financial system has been shaken badly 

by the extent, the scope, and the rapidity of the financial meltdown. As a 

former financial regulator in the State 

of Maine, a position I held for 5 years, 

I have become convinced that significant regulatory reforms are required to 

restore public confidence and to ensure 

that the absence of regulation does not 

allow a crisis like the one we are engulfed in now to happen ever again. 

Therefore, today I will introduce a 

bill that would close two dangerous 

gaps in the Government’s system for 

overseeing financial markets. The bill 

would also establish a formal process 

for developing additional, comprehensive reforms of our financial regulatory 

system. 

Our economy has struggled with a 

credit crisis spawned by mortgage defaults in the subprime mortgage market and their ripple effects throughout 

markets for mortgage-backed securities. Complex financial instruments 

that were poorly understood, not transparent, and, in many cases, not regulated have exacerbated the crisis. 

What was once thought of as America’s mortgage crisis has metastasized 

into a nightmare of converging forces 

that could lead to a deep and global recession. As we have so painfully 

learned, financial markets are truly 

global, and the hopes and fears that affect these markets move with the speed 

of light through electronic communications and electronic trading. 

The consequences in our country 

have been dire: falling home prices, rising foreclosure rates, plunging consumer sales, increased unemployment, 

a tremendous erosion of retirement 

savings, and billions of dollars for 

emergency stabilization programs. We 

are even looking at a Federal deficit 

that could reach the extraordinary figure of $1 trillion. 

The Maine lobster industry, the paradigm of hardy, small town entrepreneurship, has also felt the blows of the 

crisis in high finance and a terrible 

economy. It is not only that consumers 

have reacted by reducing their purchases of lobsters—although that is 

one factor—it is also that the lobster 

industry is an innocent victim of the 

global financial crisis. 

It is extraordinary that the global financial crisis is putting the very existence of Maine’s centuries-old lobster 

industry in jeopardy. 

Here is what happened. In addition to 

plunging demand, many lobstermen in 

Maine send their lobsters to Canadian 

processors. Well, it turns out that 

those Canadian processors are, in turn, 

financed largely by financial institutions in Iceland—in Iceland. 

When the Iceland financial system 

collapsed, credit was terminated to the 

Canadian processors, which, in turn, 

stopped processing Maine lobster. Who 

would have guessed that the failures of 

banks in Iceland would claim as victims the lobstermen in the State of 

Maine? But that shows how integrated 

our financial system is worldwide. A 

lobster dealer in my State said: 

This is as devastating to the State of 

Maine as Hurricane Katrina washing away 

all the boats and blowing down all the 

wharves. 

Nor is the fallout from the financial 

crisis confined to our shores. This past 

weekend, leaders of the G–20 nations 

who represent 85 percent of the world’s 

economic activity met in Washington 

to address this crisis. Clearly, we need 

a coordinated global response to the 

downturn, but we also must take action to right our own ship. As we close 

out the 110th Congress and prepare to 

reconvene for the 111th, we must consider how to protect our financial system from the shortfalls in regulation, 

reporting, and transparency that 

helped lay the groundwork for a sudden 

and traumatic onslaught of bad economic news. 

Consider that less than a year ago, 

the American financial system boasted 

five huge investment bank holding 

companies: Bear Stearns, Lehman 

Brothers, Merrill Lynch, Goldman 

Sachs, and Morgan Stanley. Today, 

those institutions no longer exist as we 

had long known them. They have failed 

or are being acquired or, as Goldman 

Sachs and Morgan Stanley demonstrate, have converted themselves to 

bank holding companies subject to 

Federal Reserve supervision. What is 

astonishing, however, is that current 

Federal law assigns no agency responsibility for supervising these enormous 

institutions, even though experience 

has shown their safety and soundness 

could have vast implications for the financial system and the broader economy. Think about that. Your local 

credit union, your small community 

bank is subject to safety and soundness 

regulations, but these enormous Wall 

Street financial institutions that arguably have a far greater impact on our 

economy have not been subject to safety and soundness regulations. Instead, 

they participated in a completely voluntary program of the Securities and 

Exchange Commission—a program that 

was later deemed as inadequate by the 

SEC Chairman as he canceled it this 

fall. 

My legislation would apply safety 

and soundness regulation to investment bank holding companies by assigning the Federal Reserve this responsibility. Although the five big 

firms have left the field, this is a necessary step. Any new investment bank 

holding company that might be organized would fall into the same regulatory void as its predecessors. The 

SEC would be able to regulate its 

broker-dealer operations, but no Federal agency would have the explicit authority to examine its operations for 

safety and soundness or for systemic 

risk. The collapses at Bear Stearns and 

Lehman Brothers illustrate the tremendous hardship that can result 

under the recent voluntary system. 

Federal financial officials have also 

pointed to a ‘‘massive hole’’ in their 

ability to monitor and manage systemic risk. That is the rapidly expanded markets in private, over-thecounter contracts known as ‘‘credit default swaps.’’ These are contracts that 

involve paying for protection against 

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S10550 CONGRESSIONAL RECORD — SENATE November 17, 2008 

default, loss of value, or another credit 

event that might affect a financial 

asset such as a government or corporate bond or a mortgage-backed security. 

As government officials and financial 

experts have pointed out, there is nothing perhaps inherently wrong with 

such contracts. The problem, however, 

is that credit default swaps are not 

traded on regulated exchanges, are not 

officially reported to our Nation’s financial regulators, and are not even 

subject to recordkeeping requirements. 

Some are visible to bank examiners 

who may take them into account when 

considering a bank’s risk exposure and 

others are summarized in voluntary 

publications, but that is only a partial 

glimpse into a market whose total national value has been estimated as high 

as $60 trillion. 

As the cases of Lehman Brothers and 

AIG insurance holding company 

showed this year, serious problems can 

arise when a major credit event suddenly reveals that massive claims for 

collateral posting or payment are converging on credit default swap parties 

who cannot meet their obligations. But 

under the current system, it is often 

impossible for regulators and even 

market participants to know in advance how all the tangled webs of contract commitments overlap and affect 

any particular party. This leaves regulators unable to take action against excessive debt, inadequate reserves, or 

other threats. 

For example, Bear Stearns had a financial leverage ratio of 35 to 1. In 

other words, the firm borrowed $35 for 

every dollar of its own money. That 

level of debt financing can generate 

fabulous profits for shareholders and 

mind-boggling bonuses for top executives when investments flourish but 

can whipsaw disastrously if they drop 

in value. If your equity capital is $1 

and you borrow $35 more to buy an 

asset worth $36 and the value of that 

asset declines by only $2, to $34, you 

are insolvent. 

Although credit default swaps are 

contracts rather than asset purchases, 

they can also overwhelm sellers and 

leave buyers unable to get payment for 

the protection they thought they had 

secured. Excessive leverage and excessive risk exposure can combine to ruin 

even giants such as Lehman Brothers 

and AIG. 

The fallout from such collapses extends far beyond the firms’ investors, 

employers, and business partners—and 

this is the important point. It would be 

one thing if the bad decisions made by 

Wall Street firms only affected those 

firms, but that is not the case, as we 

have learned all too well. People in 

Maine and other Main Street Americans have felt shock and despair in reviewing the statements for their 401(k) 

accounts. For these people, the fact of 

their loss is far more important than 

its cause. But for us who are assigned 

the role of policymakers, understanding the cause of the problem is 

critical if we are to prevent its recurrence. 

We now know that a fundamental 

source of trouble was the lack of effective oversight, of regulation for safety 

and soundness for the highly leveraged 

investment bank holding companies. 

And we know that the second problem 

is the lack of transparency and coordination in the enormous market for 

credit default swaps. 

My bill would address the second 

problem in two ways. First, it sets a reporting requirement. For any U.S. entity that buys or sells a credit default 

swap contract, it must report that fact 

to the Commodity Futures Trading 

Commission. This simple step will go a 

long way to increasing the transparency and allowing us to identify potential risks. Second, my bill would 

add the force of law to the clearinghouse initiative being jointly pursued 

by the Federal Reserve Bank of New 

York, the SEC, and the CFTC. 

The clearinghouse, however, should 

be codified. We can’t rely on a voluntary arrangement. The SEC’s top 

risk-management official recommends 

such a statutory mandate to ensure 

participation, and that is what my bill 

would do. As two NYU finance professors wrote in a recent essay for Forbes: 

It is time to ‘‘lift the veil’’ from these 

derivatives with more reporting and 

with centralized clearing operations. 

Correcting those gaps are important 

steps toward preventing repetition of 

the painful financial collapses we have 

seen. But we must also look in the long 

term at comprehensive financial reform. The Emergency Economic Stabilization Act that was signed into law 

last month calls for two reports to advance that goal. One is due in January 

and one in April. Those will be useful, 

but I believe our deliberations would 

benefit from having the advice not only 

of a small panel on a short deadline 

and of the new administration but also 

from a special commission modeled on 

the one created to examine the terrorist attacks of September 11, 2001. 

Fortunately, a plan for such a commission exists. It has been developed by 

my colleagues, Senator LIEBERMAN and 

Senator CANTWELL, and that has been 

incorporated into my bill as well. 

I believe this issue of restoring confidence to our financial markets 

through a strong and effective regulatory reform bill is so critical to our 

Nation—critical for promoting growth 

and job creation, for protecting retirement savings and public services, for 

restoring credit to households and 

small businesses, and for promoting 

transparency and accountability in financial markets—that we should focus 

on it in a special session in December. 

But regardless of the decisions made 

by our leadership on that issue, I hope 

the introduction of the Financial Regulation Reform Act of 2008 will prompt a 

much-needed debate on the fundamental changes needed to modernize 

and strengthen our system for monitoring and regulating the immensely 

complicated financial markets that 

supply the lifeblood for growth for our 

country. 

Madam President, I suggest the absence of a quorum. 

The PRESIDING OFFICER (Mrs. 

STABENOW). The clerk will call the roll. 

The assistant legislative clerk proceeded to call the roll. 

Mr. WHITEHOUSE. Madam President, I ask unanimous consent that the 

order for the quorum call be rescinded. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

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VETERANS DAY 

Mr. KYL. Madam Presdient, November 11 marked the 54th anniversary of 

Veterans Day. It is an occasion when 

we must remember the great debt that 

we owe veterans and members of the 

armed services who fight to maintain 

our freedom around the world. 

Throughout history, our soldiers have 

risked their lives to defend our freedom, and we must not forget their sacrifices. 

For my State of Arizona, Veterans 

Day is particularly special because it is 

home to over 560,000 veterans. Each one 

has worked to maintain our freedom. 

Whether as a medic administering aid 

to a fallen soldier, a soldier rooting out 

the enemy in a safe house, or a mechanic servicing the military equipment, every veteran played an integral 

role in our military and thus strengthened our Nation. Our veterans shouldered this great responsibility with 

courage, dedication and honor. We, as a 

Nation, cannot forget the countless 

sacrifices our veterans have made for 

this country. 

Brave men and women in our Armed 

Forces continue to fight the war 

against terrorists. It is important to 

remember that the troops currently 

working to defeat the terrorists all volunteered for our Nation’s military. 

Young people today are presented with 

many opportunities when they begin 

their careers, and many serving in the 

military could have chosen a more lucrative career that would not put them 

in harm’s way or take them away from 

their families. This act of selflessness 

not only underscores the patriotism of 

our Nation, but also highlights the 

dedication of our Nation’s youth. We 

should be thankful that so many Americans are willing to serve their Nation, 

particularly at such a critical and dangerous time. 

In the coming year, Congress will be 

called upon to preserve care and services to our veterans, as well as to support our men and women who are engaged in the missions abroad. We cannot forget those who have given up so 

much to fight for our Nation, and we 

will work to ensure that our veterans 

and soldiers are recognized for their 

service. 

My family and I pay respect to all 

soldiers who have sacrificed to ensure 

America remains free, safe, and the 

symbol of democracy for the world. I 

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