October 2, 2008 CONGRESSIONAL RECORD — SENATE S10429 

I offer my thanks and best wishes to 

WAYNE ALLARD and his wife Joan as 

they turn to the next chapter of their 

productive lives. 

LARRY CRAIG

I rise today to pay tribute to my colleague from Idaho, Senator LARRY

CRAIG. As the chairman of the Armed 

Services Committee, I can particularly 

appreciate the vital role played by the 

Veterans’ Affairs Committee. LARRY

served as the chairman of that important committee from 2005 to 2007, and 

the ranking member since then. During 

his tenure, Veterans’ Affairs has been 

challenged by two ongoing wars and, 

more recently, by public revelations of 

serious deficiencies in our system for 

caring for our wounded warriors. 

Helping our Nation’s wounded warriors is a cause to which LARRY CRAIG

is profoundly committed. He has 

fought for our deserving and brave veterans, introducing bills to improve educational opportunities and to expand 

benefits for traumatic injuries. He 

helped make possible a rare joint hearing between the Veterans’ Affairs Committee and the Armed Services Committee to look into the situation at 

Walter Reed and help formulate the 

wounded warrior legislation which 

passed through the Senate with overwhelming bipartisan support as part of 

the Defense Authorization Act for fiscal year 2008. 

While LARRY CRAIG and I often been 

on opposite sides of policy debates, I 

admire his commitment to his views 

and to the people of Idaho. In addition 

to the Veterans’ Affairs Committee, 

Senator CRAIG serves as the ranking 

member on the Subcommittees on Interior and Related Agencies, and 

Superfund and Environmental Health, 

legislative areas of great concern to 

the citizens of Boise, the ranchers of 

Midvale and the skiers of Sun Valley. 

And today, I join my colleagues in 

thanking LARRY CRAIG for his service 

to his State and his country, and I wish 

him and Suzanne the very best in the 

future. 

f 

EMERGENCY ECONOMIC STABILITY 

ACT 

Mr. KYL. Mr. President, I know that 

many of my fellow Members are concerned about the scale of this package. 

And while I agree that more private 

sector involvement would be preferable 

to placing hundreds of billions of taxpayer dollars at risk, I think that the 

enormity of the current financial crisis 

requires the government to act. I believe that the legislation before us will 

establish the appropriate conditions for 

financial markets to begin repricing 

mortgage related investments like 

mortgage backed securities, MBS, 

collateralized debt obligations, CDOs, 

and whole loans in order to provide liquidity to solvent financial institutions. Then, these institutions can 

begin trading again so that we can 

avoid a complete collapse of our nation’s credit markets and return to 

normal. 

Impaired loans are now being held on 

the balance sheets of banks and other 

financial institutions as mortgage 

backed securities, MBS. Uncertainty 

surrounding the value of the underlying mortgages has made it virtually 

impossible to find an efficiently functioning market for these securities or 

rationally value them. 

The uncertainty surrounding the 

value of these assets has caused banks 

and other financial institutions to 

gradually withdraw from the market 

and refrain from making new loans to 

firms or individuals in order to preserve their capital. Unfortunately, the 

underlying value of many of these securities is high but firms lack confidence to reengage in the market. 

The Treasury’s plan intends to make 

a market for these securities, allow 

them to be priced so that trading can 

continue and reinitialize financial 

intermediation. 

Treasury’s ‘‘troubled asset relief program’’ will purchase illiquid mortgage 

assets directly using a reverse auction 

to purchase the impaired assets in 

order to create a market and establish 

a price for the assets. In a reverse auction the role of buyer and seller are reversed. In a standard auction, buyers 

compete by make bids for a security 

and the best offer is taken, thereby establishing a price. This price discovery 

process is important because it reveals 

information about what the buyers and 

sellers think a security is worth. A reverse auction would also be better than 

Treasury trying to assign a price without the input of the seller. It would 

also hopefully prevent Treasury from 

paying too high a price. 

The Secretary of Treasury, Chairman 

Bernanke, large national financial institutions, small Arizona community 

banks and credit unions have all 

warned me of the serious implications 

of not passing this legislation and the 

impact it will have on the lives of everyday Americans. 

Sound financial institutions, manufacturers and small businesses are all 

struggling to find investors willing to 

provide them with cash to fund their 

operations. Instead, investors are irrationally selling their stocks and bonds 

regardless of whether or not the companies are making money and are instead hording cash, investing their 

money in government bonds and even 

gold. 

If Congress fails to act, the consequences for Main Street will be severe. If banks are even willing to lend, 

mortgage loan interest rates will continue to rise making the purchase of a 

home less affordable. Major manufacturers won’t be able to obtain affordable credit to purchase the raw materials and working capital that they 

need to stay in business. America’s 

farmers won’t be able to finance the 

large upfront costs associated with 

purchasing fertilizer and seed to plant 

their crops. Small businesses will not 

be able to get funding to extend credit 

to their own customers who wish to 

make every day purchases. Loans for 

college could dry up. 

The stock market lost over a trillion 

dollars on Tuesday, reducing American 

wealth and individuals’ retirement accounts. For the tens of thousands of 

dollars in reduced account balances, 

those in retirement or approaching retirement will be forced to contemplate 

accepting a lower standard of living in 

retirement or consider working longer. 

One must remember that even 

though the plan contemplates the purchase of up to $700 billion in assets that 

the program is not likely to cost the 

taxpayer that much or even a significant portion of that amount. 

According to CBO, ‘‘enacting the bill 

would likely entail some budgetary 

cost which would, however, be substantially smaller than $700 billion.’’ 

Why? Treasury will be borrowing 

money to buy assets, many of which do 

have value and are generating income. 

Most of the whole mortgages which underpin the MBS and CDOs Treasury 

will purchase have value because most 

Americans are current on their mortgage payments. In fact, 92 percent of 

mortgages are performing. 

Any potential cost associated with 

the program is likely to be offset because Treasury can take advantage of 

our government’s low financing costs 

and purchase MBS by borrowing at 

around 3.5 percent. The difference between the rate Treasury borrows funds 

at and the return on MBS will be profit 

which can be used to help finance the 

overall program. 

Furthermore, like any good investor, 

the government will be buying securities at a relatively low price, likely 

below the securities’ fair market value 

and holding the assets until their price 

rises. 

The bill also includes a provision intended to protect against potential 

losses by requiring that firms selling 

troubled assets to the government provide warrants or senior debt instruments. The warrants would give the 

Treasury the right to buy stock in the 

future at a fixed price. 

In fact, warrants were issued to the 

federal government as part of previous 

deals to provide lending to both Chrysler and America West Airlines, AWA. 

According to CBO, ‘‘AWA partially 

compensated the government for the 

loan guarantee by giving it warrants to 

buy as many as 18.8 million shares of 

the company’s Class B common stock 

at an exercise price of $3 per share—the 

strike price—for a term of 10 years. 

Those warrants increase in value with 

the market price of AWA stock and 

thus provide the government with additional compensation if its guarantee 

allows the company to return to profitability. Similarly, Chrysler issued warrants to the government to purchase 

up to 14.4 million shares of Chrysler’s 

common stock, also with a term of 10 

years.’’ 

The Federal Government lost $85 million and $256 million on America West 

and Chrysler’s actual loan guarantees, 


rfrederick on PROD1PC67 with SENATE
S10430 CONGRESSIONAL RECORD — SENATE October 2, 2008 

respectively. However, the warrants 

gained in value making the Federal 

Government $80 million and $119 million, respectively ultimately reducing 

the overall cost of both loans to the 

taxpayer. 

One final element of the plan protecting taxpayers requires that in 5 

years, the President submit a proposal 

to Congress to recoup any projected 

taxpayer losses from those in the financial services industry that benefit 

from the program. 

So as a result of these protections 

every dime we get back from asset 

sales, warrants or future recoupment 

will go to debt reduction. 

Mr. KERRY. Mr. President, to protect and defend the economic health of 

our Nation and the security of the systems on which our prosperity depends, 

I am pleased that the Senate passed 

the Emergency Economic Stabilization 

Act last night. I call upon my colleagues in the House of Representatives to pass this legislation as soon as 

possible because I believe it will help 

restore confidence in our capital markets and our financial institutions. It 

will help our Nation avert serious economic dislocation that could have been 

the cost of inaction 

I want to take this opportunity to 

thank Majority Leader REID, Senate 

Banking Committee Chairman DODD

and Senate Finance Committee Chairman BAUCUS for their efforts to include 

critical modifications to the proposed 

plan by Treasury Secretary Paulson 

and Federal Reserve Chairman 

Bernanke. This legislation we are considering today includes provisions that 

will protect the taxpayer, limit executive compensation, provide critically 

needed assistance to homeowners, and 

provide strong congressional and judicial review procedures. Without their 

efforts, I do not believe we would have 

been able to pass this critically needed 

legislation. 

Our Nation is facing its greatest economic crisis since the Great Depression. A series of financial institution 

failures and frozen credit markets have 

imperiled our economy. We need to 

take immediate action to restore confidence and help stop this threat and 

stabilize our financial system. 

Every American family is concerned 

about the economic situation we face. 

They are already facing rising gas 

prices, food prices, health care costs 

and college tuition. Many are wondering: How will bailing out Wall 

Street firms help me? The answer is we 

have to bail out Wall Street to protect 

Main Street. 

This will not be done without great 

expense to the taxpayers. However, I 

strongly believe that taking quick and 

decisive action is not only our best option it may be our only option. As we 

consider this extraordinary commitment on the part of the American taxpayer, we have to ask ourselves: What 

is the price of inaction? 

The ripple effect of the collapse of 

Wall Street’s major financial institutions could develop into an economic 

disaster sweeping across the country. 

The stark reality is that without massive Federal assistance, our financial 

system could collapse. Small businesses would be unable to obtain financing and jobs would vanish. Families would be unable to borrow for new 

homes or to send their children to college. Retirement funds could plummet. 

Those are the stakes. 

The Emergency Economic Stabilization Act will provide up to $700 billion 

to the Secretary of the Treasury to buy 

mortgages and other assets from financial institutions. Instead of giving all 

the funds at once, as requested by Secretary Paulson, the legislation gives 

the Treasury only $250 billon immediately. The bill requires the President 

to certify that the additional $450 billion are required subject to congressional disapproval. It requires the 

Treasury to modify mortgage loans 

whenever possible to help keep families 

in their homes. It requires companies 

that sell bad assets to the Government 

to give taxpayers the opportunity to 

share in their future growth. This will 

help offset the costs of this program. 

Finally, it includes meaningful limits 

on both executive compensation and 

‘‘golden parachutes’’. This will help insure that not one dime of taxpayer 

funds will be used to pay the salary of 

CEOs who have abused the public trust 

and played a role in developing the economic crisis we face. 

American families must have confidence that the deposits they have in 

our banks are safe. Thanks to measures 

put in place during the Great Depression, deposits of up to $100,000 are guaranteed by the Federal Government. I 

am pleased this legislation temporarily 

raises the FDIC limit to $250,000. I 

think it will help small businesses, 

make our banking system more secure, 

and help restore public confidence in 

our financial system. 

The Emergency Economic Stabilization Act of 2008 also contains an important provision that will help hundreds 

of community banks throughout the 

country. Prior to the Federal Housing 

Finance Agency placing Fannie Mae 

and Freddie Mac into conservatorship, 

many banks had invested in Fannie 

Mae and Freddie Mac preferred stock. 

Unfortunately, the value of these 

shares was essentially eliminated due 

to the Government’s action. These investments—standard means for the 

banking industry and the GovernmentSponsored enterprises to provide and 

raise capital—have always been viewed 

as a conservative investment by financial institutions. 

These investments provided capital 

to Fannie and Freddie, and thus indirectly benefited the economy by helping Fannie and Freddie provide liquidity to the secondary mortgage market. 

Unfortunately, losses on these shares 

will have significant tax consequences 

for these banks, which will translate 

into fewer loans being made across the 

Nation. 

Section 301 of the legislation provides 

targeted tax relief for all banks holding Fannie Mae and Freddie Mac preferred stock by allowing institutions to 

treat the losses on these securities as 

ordinary losses for tax purposes. This 

temporary change will provide a vital 

tax reduction against ordinary income 

and preserve a portion of the capital 

lost due to the Government’s actions 

with regards to the Government-sponsored enterprises. 

The bill is designed to give all 

banks—especially community banks— 

regardless of size or organizational 

structure, ordinary tax relief for these 

holdings. I encourage the Secretary of 

the Treasury to work with Congress 

and the banking industry to ensure 

that all institutions have access to this 

relief. 

We have no guarantee that this program will fix this acute crisis. What we 

do know is that if Government does not 

step in to provide funding, we could 

hasten an economic meltdown. 

After this plan is enacted into law, 

we must take bold action to revamp 

our regulatory practices, fix the derivatives market, offer an additional 

economic stimulus for businesses, provide liquidity for small businesses and 

provide real assistance to families 

bearing the weight of the crisis. This 

will be a long process. 

I believe the moment has come to 

rethink the trend over the past generation toward deregulation of our financial institutions and capital markets. 

You can see it in the excessive use of 

derivatives to manage risk. You can 

see it in the reckless use of leverage by 

some financial institutions to finance 

ever riskier and more lucrative financial products. You can see it in our 

housing markets, where the concept of 

risk became our greatest undervalued 

asset. You can see it in the failure to 

require Fannie Mae and Freddie Mac to 

set aside the appropriate capital reserves. You can see it in the outrageous salaries that so many CEOs of 

troubled companies have earned in recent years which can be tied directly to 

the strategies they adopted that 

showed no respect for the risks they 

were taking with other people’s money 

or to our Nation’s economic future. 

This was a perfect storm: irresponsible lending, irresponsible borrowing 

and a lack of basic oversight and effective regulation put millions of families 

in homes they could not afford. Too 

many Americans took unreasonable 

risks to buy a home when markets 

were booming. Too many financial institutions lowered their lending standards but didn’t plan appropriately for 

increased risk. At the same time, some 

borrowers inflated their incomes and 

misrepresented themselves in order to 

buy expensive homes that they could 

not afford. 

In 1994, I supported the Home Ownership and Equity Protection Act which 

gave the Federal Reserve the authority 


rfrederick on PROD1PC67 with SENATE
October 2, 2008 CONGRESSIONAL RECORD — SENATE S10431 

to prohibit unfair and deceptive lending practices. It took the Federal Reserve 14 years to implement regulations to stop abusive and deceptive 

practices which helped cause the housing crisis. 

Since 2000, I have been concerned 

about predatory lending and have supported legislation to stop the excesses 

that these lenders have too often hoodwinked homeowners into accepting. It 

stopped companies from imposing highcost mortgages, included critical consumer disclosures, required creditors to 

assess the consumer’s ability to pay, 

prohibited prepayment fees and penalties. This could have stopped many of 

the excesses we are paying for today 

from occurring in the first place. Unfortunately, this legislation did not receive any support from the other side. 

The damage has been staggering. 

Five million homeowners are either in 

default or in foreclosure and 10,000 

more join them in foreclosure every 

day. Some economists warn that the 

spike in foreclosures could lower home 

values by 30 percent—when even a 10 

percent decline takes $2 trillion in 

wealth from American homeowners. 

The loans financing these homes are 

now frozen on the balance sheets of 

banks and other financial institutions, 

preventing them from providing new 

loans. Today we are living the consequences: an economy teetering on 

the edge. 

It is obvious to every American that 

we need greater regulation of our mortgage markets and our lending practices. We must eliminate the unfair 

and deceptive practices that helped 

cause our current economic difficulties 

immediately. 

Another crucial ingredient in today’s 

crisis is the use of complex financial 

derivatives. These complex financial 

maneuvers—hidden from the view of 

most Americans—have quietly become 

a crucial part of managing risk in our 

economy. In May, the Bank for International Settlements estimated that 

the total value of derivative contracts 

was approximately $600 trillion. To put 

this speculation in context: that is 200 

times larger than the Federal budget. 

Derivatives are essentially bets on 

future economic behavior: financial 

contracts which can gain or lose value 

as the price of some underlying commodity, financial indicator or other 

variable changes. Unfortunately their 

rise to prominence in our economy was 

not matched with an increase in regulation or transparency. Warren Buffett 

has previously called derivatives ‘‘. . . 

financial weapons of mass destruction, 

carrying dangers that, while now latent, are potentially lethal.’’ 

The continuing uncertainty over derivatives has helped to bring about the 

recent freeze in our credit markets. 

For example, Bear Stearns was deeply 

involved in the financial derivatives 

markets. The Federal Reserve eventually provided up to $30 billion and convinced JP Morgan to purchase Bear 

Stearns because they feared its sudden 

collapse would produce a tidal wave of 

defaults around the globe. Also, since 

Lehman Brothers filed for bankruptcy, 

financial institutions and corporations 

have been unsure how to process and 

cover its derivatives and credit default 

swaps. 

Congress must consider and pass legislation to reform and manage derivatives. We must learn from the current 

crisis and develop safeguards that ensure that the failure of a financial institution which holds derivatives does 

not cause a freeze in our credit markets. 

The housing crisis also triggered a 

reassessment of other financial risks, 

including leveraged loans taken out by 

financial institutions to increase profits. This approach allows institutions 

to take much larger market positions 

which increases their profits but also 

increases their risk. In 2004, the Securities and Exchange Commission relaxed 

capital rules for investment banks 

which allowed these firms to increase 

their risks during good economic 

times. Unfortunately, some financial 

institutions were reckless in their use 

of leverage. 

Published reports say Merrill Lynch 

borrowed an astounding 44 times the 

size of its capital to increase profits. If 

you borrow 44 times your capital and 

your investments increase only 1 percent you have actually made a 44 percent profit. Unfortunately, the reverse 

is also true. Think about it: If you have 

$1 and you use it to borrow and invest 

$44, common sense tells you that if 

things go wrong, you will be in a world 

of trouble. Well, that is exactly what 

happened. These risky investments 

caught up to Merrill Lynch. They were 

bought out by Bank of America after 

facing bankruptcy earlier this month. 

We need to dramatically increase our 

oversight of all financial institutions 

and increase capital standards to insure companies like Merrill Lynch and 

Lehman Brothers can never again impact the U.S. financial system due to 

their risky business plans. 

The government sponsored entities, 

GSEs, particularly Fannie Mae and 

Freddie Mac and the FHA have played 

a critical role in expanding homeownership. However, like too many financial institutions, these organizations included subprime mortgage debt 

in their portfolios but didn’t plan appropriately for the increased risk they 

had incurred. The Congress and the 

Bush administration also failed to require Fannie Mae and Freddie Mac to 

increase their capital requirements to 

adjust to the increased risks. As a result, the Bush administration was 

forced to put both Fannie Mae and 

Freddie Mac into conservatorship earlier this month at a cost of approximately $200 billion to the taxpayers. 

Back in 2004, I said that I expressed 

concern about governance and accounting problems at Freddie Mac and that I 

would support legislation that provides 

for strong, effective supervision and 

regulation of government-sponsored 

enterprises within a framework that 

assures their safety and soundness. 

During the 109th Congress, the Bush 

administration blocked the enactment 

of bipartisan legislation to reform 

Fannie Mae and Freddie Mac. 

Going forward, in order to stop the 

increasing numbers of foreclosures, we 

need the GSEs to continue their mission, within appropriate capital constraints, to help stabilize the mortgage 

markets. 

Executive compensation is another 

area that we need to address. We have 

all read about the outrageous salaries 

that many of the CEOs of troubled 

companies have earned over the past 

few years. Some have increased their 

pay by increasing the risks their companies take. I am pleased that Chairman BAUCUS of the Senate Finance 

Committee is pushing for changes in 

the Treasury proposal to prevent excessive compensation and golden parachutes for executives who sell troubled 

assets under the Treasury program. 

CEOs, who abused the public trust and 

played a role in developing the current 

economic crisis and are now asking to 

be bailed out, will not be able to receive severance packages or excessive 

salaries. Taxpayers will not subsidize 

their excessive salaries. 

When you add it all up, the financial 

crisis is a result of failures over the 

past generation to provide appropriate 

regulation and supervision of the financial services industry. Over the past 8 

years, however, what was effectively a 

trend toward deregulation turned into 

a stampede. The Bush administration 

and others in Congress have consistently railed against oversight and accountability during the last 8 years; 

now taxpayers are forced to clean up 

this administration’s mess. 

So I urge my colleagues in the House 

of Representatives to come together to 

support the Emergency Economic Stabilization Act that will help protect 

our vital national interest in the continued health of our economy. Next, we 

need to come together as a nation to 

help those who have been hurt by the 

economic crisis and to finally respond 

to the structural problems that have 

brought us to this point. 

Mr. REED. Mr. President, middleclass families are being squeezed financially. They feel that the economy and 

the Government are just not working 

for them. 

The vast majority of Americans are 

unhappy with the direction President 

Bush has led us over the last 8 years. 

For most of the last decade there has 

been far too little oversight of the financial marketplace and too little help 

for the middle class. 

I share that frustration. I have voted 

time and again for common sense tax 

cuts for the middle class, developing 

alternative sources of energy, like 

solar and wind power, greater investment in our roads and bridges, improving our schools, and expanding health 

coverage for children, new regulations 

to protect consumers, a responsible end 


rfrederick on PROD1PC67 with SENATE
S10432 CONGRESSIONAL RECORD — SENATE October 2, 2008 

to the war in Iraq and a host of other 

important initiatives, but the sad reality is that time and again those efforts have been dashed by filibusters 

and vetoes by the President and his allies. 

But as real as that frustration is, the 

economic situation requires us to act 

swiftly and responsibly. 

The choice now is to act on this bill 

or watch as this economic crisis makes 

the already difficult economy even 

worse. If we fail to act, there will be 

more impacts on the lives of an already 

struggling middle class—job losses, 

pension losses, and an ever harder time 

paying for college. 

That is why we must act, and that is 

why we must pass this legislation. 

When this proposal was first unveiled, it was little more than a blank 

check, and I know the people of Rhode 

Island were outraged just like me. 

But this proposal is vastly different. 

Gone is the blank check. 

In its place there are strong protections for the taxpayers, a greater likelihood of success, better oversight, and, 

most importantly, a chance for a return on this investment in stabilizing 

the economy. 

When the President sent us his blank 

check, it was clear that we needed to 

make sure we followed the same principle anyone follows when they lend 

money which is that you get paid back. 

That is why I fought and got bipartisan 

support for a provision that ensures 

taxpayers do not remain exposed to all 

of the risks of this program by requiring if you participate in this taxpayerfunded program, that taxpayers get a 

piece of your future profits through a 

share in the profit of the assisted company. 

This device, known as a warrant, is 

nothing new, and it can be very effective. In fact, in the Chrysler loan guarantee, warrants were used and resulted 

in a profit to the Government and in 

turn the American people. Warrants 

were also a part of the successful effort 

to revive the airline industry after 9/11. 

Most recently, Warren Buffett included 

them in his deal with Goldman Sachs 

last week, as did the FDIC in its recent 

brokering of the purchase of Wachovia 

by Citibank. 

Warrants allow the taxpayers to get 

their money back and more if a participating company rights itself. In other 

words, as the company’s stock goes 

up—as it should over time—taxpayers 

get to participate in that appreciation 

and even enjoy a reasonable premium. 

No one will be shocked to learn that 

the President and Wall Street opposed 

my idea for warrants. But when faced 

with the simple fact that any Wall 

Street business transaction would 

exact no less of a price, protecting the 

taxpayer won and the special interests 

lost. 

There are no guarantees that the assets purchased under this program will 

eventually appreciate, though that is 

certainly our hope, but at the very 

least warrants help safeguard the taxpayer against losses on those assets 

that underperform. 

It is only right to ensure that the 

taxpayer not foot the bill for this rescue plan because the point of this economic rescue plan is to provide liquidity throughout our credit markets, not 

to line the pockets of those looking to 

make a buck on the backs of the taxpayer. 

We also said ‘‘no’’ when it came to 

the President’s proposal to spend all 

these funds with zero oversight and 

transparency. Now, there is a clear requirement that all of these arrangements are transparent and above 

board. Moreover, there will be a panel 

of outside experts who must report to 

the Congress and the American people 

on the Treasury Secretary’s use of 

these funds and submit a regulatory reform plan in January 2009 so we can 

work on new laws to prevent a similar 

case of market failure. And, we included provisions to ensure that no-bid 

contracts are not awarded, contracting 

rules are followed, conflicts of interest 

are prevented, and courts have the authority to review any questions about 

this law. 

And, we took a strong first step when 

it comes to the excessive pay of too 

many executives on Wall Street who 

got us into this mess. Indeed, under 

this bill, there will be no golden parachutes for those executives who helped 

create this financial crisis. Instead, 

they will see those sweetheart deals go 

away, and, indeed, the Securities and 

Exchange Commission and the FBI 

have launched investigations into 

many of these questionable financial 

transactions. 

Lastly, we should not overlook that 

this bill also extends a number of tax 

cuts that will generate investments in 

alternative sources of energy and green 

job creation as well as a tax cut for approximately 92,000 middle class Rhode 

Islanders who would otherwise face the 

Alternative Minimum Tax. 

This bill is necessary, but not perfect. It should be stronger when it 

comes to impacting those who got us 

into this mess, and it should contain 

some of the consumer and investor protections and accounting reforms I have 

called for over the years. There should 

be more resources to prevent foreclosures, not to aid people who took 

out a mortgage they should not have, 

but to protect the property values and 

stability of those neighborhoods facing 

a growing number of foreclosures. 

If we don’t follow up this vote with 

increased transparency and better regulations of the financial marketplace, 

we could very well find ourselves debating another economic rescue package in the not too distant future. 

Indeed, I have held eleven hearings 

over the last year and a half in an effort to bring these regulation and accounting issues to the attention of my 

colleagues and the administration. 

These may have seemed like arcane 

hearings to many, but the reality is 

those who were supposed to enforce the 

rules of the marketplace and protect 

the economy were asleep at the wheel, 

or worse, blinded by a misguided ideology that over-relies on deregulation. 

Time and time again, witnesses at 

these hearings said everything was 

okay or was at least manageable. They 

said we should not have hearings and 

that less oversight and regulation 

would cure any problems. Now, two of 

the companies that testified don’t even 

exist. The status quo is unacceptable, 

and I am hard at work on legislation to 

reform oversight of Wall Street because the current system failed. 

The bill is prompted by a systematic 

failure by all the financial regulators 

who turned a blind eye to the problems 

that had been identified well before 

this crisis erupted. 

Reckless and irresponsible business 

decisions brought us here, but lax oversight and poor risk management by 

regulators also played a starring role. 

No one is happy that we have to act, 

but we need to act to avoid further 

damage to our economy. The task before us now is to protect people’s jobs 

and retirement savings, and do our best 

to craft a solution to the credit crisis 

that prevents our economy from grinding to a halt. 

The question must also be asked: 

How can we prevent this from happening again? 

The administration found that it 

could no longer control events. Instead, 

events controlled the administration as 

credit markets have stubbornly remained frozen and banks still refuse to 

lend to each other. Small businesses 

are finding it harder to get credit, as 

are consumers. 

No one takes lightly voting for a $700 

billion package, even with taxpayer 

protections I and my colleagues built 

into it. These sophisticated institutions and complex instruments impact 

very concrete, everyday assets, from 

homes to retirement savings. We must 

act now to protect these important assets. 

Fundamentally, this is about protecting the savings and well-being of 

all Americans and providing access to 

capital and credit for businesses and 

governments to make investments in 

our future. 

The Senate has taken the first step 

and I urge the passage of this legislation. 

Mr. ROCKEFELLER. Mr. President, I 

rise today, at this difficult moment in 

the history of our Nation, as a proud 

Senator from West Virginia—a State 

whose people know a thing or two 

about working hard, playing by the 

rules, and protecting and defending the 

American dream in the face of adversity. They believe in looking out for 

one another, and they deserve just that 

in return from their Government. 

For some time now, many West Virginia families have been besieged by 

rising gas prices and increased food and 

utility bills. Already strained paychecks are being stretched to the limit, 

and families are increasingly finding 


rfrederick on PROD1PC67 with SENATE
October 2, 2008 CONGRESSIONAL RECORD — SENATE S10433 

themselves on shaky ground. They 

know they are one illness, one lost job, 

one accident away from falling into a 

deep hole. People are worried that they 

are going to lose their homes, they are 

watching their property values decrease as neighbors face foreclosure, 

and they are fearful that this will be 

the week their job gets cut or their retirement plan goes under. This anxiety 

is not just being felt by those who 

make the minimum wage, it is being 

felt by everyone in every corner of my 

State. People are angry, and I share 

that anger. 

I have spent my entire career fighting for West Virginians to have a voice 

and to make sure they don’t get the 

short end of the stick. The Putnam 

County factory worker who relies on 

their job at the plant, the St. Marys 

High School student who is dreaming 

of attending college to be a teacher, 

and the thousands of homeowners 

across the state who are entitled to 

real peace of mind knowing that the 

house they have been paying for every 

month like clockwork for 20 years will 

not be taken from them. 

As our financial markets have deteriorated, banks have collapsed and 

credit has begun drying up. Small businesses have had a tougher time accessing capital to operate and keep workers employed. Even prominent American companies such as GE, GM, and 

Caterpillar are beginning to feel this 

credit crunch. That means less investing in the future, fewer plants opening, 

and—what I fear most—massive layoffs, long unemployment lines, and a 

real run on the banks. 

Just yesterday I was contacted by 

the president of a midsized West Virginia manufacturing company that is 

feeling the pain of this financial crisis. 

Because of the credit crunch, his customers can’t get the capital to purchase his products, cutting in to his 

company’s sales. Monday’s huge drop 

in the stock market, after the House 

failed to pass a rescue bill, caused his 

employees’ 401(k) plans to lose a full 

year’s worth of value in one day. That 

means his employees would have to 

work one additional year in order to 

recover the value in their retirement 

plan. 

We all knew the economy was weakening but the magnitude of this crisis— 

watching our financial system crumble—has been shocking. The full impact of this disaster is not yet known, 

but it is safe to say this is the most 

troubling series of financial events I 

have seen in my lifetime. 

In response to this crisis, the President sent the Congress a request for a 

$700 billion blank check—with no details on how the money would be spent, 

no oversight, no regulations for greedy 

Wall Street bankers, and most importantly no protections for taxpayers. 

With my colleagues on both sides of 

the aisle, I have been working to determine the best way forward. I have considered the situation and the options 

very carefully. I have consulted experts 

in West Virginia and elsewhere, and I 

have concluded that what we face is extremely serious; and if we do not take 

action now, the impact on West Virginia families will be devastating. 

We should not be in this situation. 

The lack of regulation or warning by 

the Bush administration is reprehensible, but the challenge is very serious 

and we must face it together head on. 

There is no guarantee that a rescue 

plan will stop the bleeding, but we 

must try. 

From the beginning, I made it very 

clear that I would only support a rescue plan that looked out for the needs 

of people on Main Street and for the 

taxpayers who work to keep this country strong. The rescue plan we have 

agreed to is designed to help West Virginians get some of the financial help 

and tax relief they need and will need 

in the difficult months ahead. The plan 

is not perfect and we must do more— 

but it is an important step. 

Six key pieces of the legislation were 

critical for my support: 

First, the bill mandates that taxpayers share in any future profits in 

order to recoup their funding if at all 

possible. 

The legislation gives the Treasury 

Department the authority to take warrants or equity in companies that participate, effectively acquiring stock in 

the company. The warrants help reduce 

the risk to the taxpayers. If the price 

the government pays for the assets is 

low and the banks end up benefiting, 

the government would own a share of 

that benefit. If the government is unable to recover the money spent by 

Treasury after five years, the President 

must submit a plan to recover the 

shortfall from the financial services industry. 

Second, the bill establishes an oversight board and an independent Inspector General who will watch over the 

day-to-day operations of the Treasury 

from the inside out. 

I joined some of my Senate colleagues led by the distinguished chairman of the Senate Finance Committee, 

MAX BAUCUS, in calling for this IG. The 

American people deserve the advocacy 

of a tough, independent IG who wakes 

up every morning with one mission in 

mind: to track the work of the Treasury—in the greatest detail possible—in 

order to hold the officials executing 

this plan accountable and protect taxpayer dollars. 

Third, the bill limits executive pay 

for failed CEOs who abused the public 

trust, and for continuing or future 

CEOs whose companies participate in 

the Government rescue. 

It was recently reported that Wall 

Street’s five biggest firms paid more 

than $3 billion in the last 5 years to 

their top executives while they presided over the sale of the subprime 

loans and securities that brought down 

our financial markets. This is offensive 

and immoral. These are taxpayer dollars—the American people’s money— 

and we cannot allow this to continue. 

The legislation limits CEOs and corporate executives from leaving companies they drove into bankruptcy with 

‘‘golden parachutes’’—especially with 

taxpayer dollars. The bill cuts the current tax deduction on executive pay in 

half and then charges a 20 percent excise tax on any company that gives excessive compensation packages. These 

restrictions were hard fought, and in 

my view not enough, but if some companies or executives find a loophole 

and try to take advantage of taxpayer 

dollars here, I assure you we will clamp 

down even further. 

Fourth, the bill provides relief to 

homeowners who have been caught up 

in the current mortgage crisis and are 

trying to save their homes. 

The bill starts to address the root of 

this financial crisis—foreclosures—not 

by giving a pass to individuals who 

took out loans they could not afford, 

but by allowing the Government to renegotiate mortgage terms. Two million 

more foreclosures are projected in the 

next year and it is in everyone’s interest to bring that number down, keeping 

more families in their homes and paying off their debts. 

Fifth, the bill raises the FDIC insurance limit temporarily to $250,000, providing more liquidity to banks and addressing the current crisis of confidence, which is causing people to pull 

their money out of their banks and 

contributing to the credit crunch. 

This is especially important to small 

businesses which employ over 50 percent of our private work force in West 

Virginia and which rely on banks to 

loan them the necessary capital to 

make payroll, stock their shelves, and 

invest in new projects and jobs. 

Sixth and lastly, the bill includes 

very substantial tax relief, so that 

working Americans also get the financial help they need in this time of crisis. 

Now 24 million families who can’t afford a higher tax bill—including 86 

thousand in West Virginia—will be protected from the Alternative Minimum 

Tax. The parents of almost 80,000 West 

Virginia children will now qualify for 

an even better child tax credit, and 

families will get help with college 

costs. Teachers who put out money 

from their own pocket to buy school 

supplies will get a deduction to help 

pay them back, and companies will get 

a boost to do more research and development and create new jobs. 

And very importantly—for a secure 

future on all fronts—the bill puts into 

law a whole host of energy and clean 

coal provisions: $5 billion for renewable 

energy, $1.5 billion for clean coal facilities, $1.2 billion for the Black Lung 

Trust Fund, and an incentive for the 

steel industry fuel, a $20 credit for carbon sequestration, and more protection 

for our coal miners with increased investment in mine rescue teams and 

state-of-the-art mine safety equipment. 

As a Governor of West Virginia during the early 1980s, I saw the crippling 


rfrederick on PROD1PC67 with SENATE
S10434 CONGRESSIONAL RECORD — SENATE October 2, 2008 

and damaging effects that the recession had on the people of my state. I 

don’t want to see our industries fail, 

thousands of people lose their jobs, or 

the kind of fear, uncertainty, and hopelessness that defined those times. 

Nothing matters more to me than 

helping West Virginia families hold on 

to their life savings, their jobs, their 

homes, their retirement, and their 

hopes for the future. 

Failure to act will severely hurt West 

Virginia families and that is a risk I 

am not willing to take. 

I also want to be clear that there are 

likely more tough times ahead. This 

plan is intended to prevent an economic catastrophe, but it alone will 

not put us on the path to prosperity. 

We still must turn our attention to 

broader economic recovery, from 

healthcare, to increased wages, to expanded job opportunities, to major public infrastructure investments, to restoring fairness to our tax system so 

that the middle class can once again 

prosper. 

The people of West Virginia deserve 

lasting solutions and I will fight every 

day to make sure this happens. 

TIMBER TAX PROVISIONS

Mrs. LINCOLN. Mr. President, I am 

concerned that this stabilization package, which includes package of business 

tax incentives, does not extend the 

timber tax provisions that were enacted in sections 15311 and 15312 of the 

farm bill and which are scheduled to 

expire in May 2009. I and others have 

long advocated the enactment of provisions that would permanently reform 

the tax rules for timber income. Given 

budget constraints, as part of the farm 

bill, we established the new rules for 1 

year as a first step. It is important 

that the provisions not be allowed to 

lapse. Otherwise, our good work could 

be undone because we will revert to the 

same situation as before in which companies that harvest timber are subject 

to higher tax rates simply because of 

their form of business organization. 

As we consider tax extenders legislation, my specific concern is that, by extending a variety of expiring tax provisions until the end of 2009 but not extending the timber tax provisions, we 

may create the impression that the 

timber tax provisions are not likely to 

be extended. Because of this concern, I 

am interested in learning, from the 

chairman and ranking member of the 

Finance Committee, about their plans 

for considering an extension of the timber tax provisions. 

Mr. SMITH. Mr. President, I agree 

with Senator LINCOLN. We made good 

progress in enacting the timber tax 

provisions in the farm bill, but we 

must take the important next step of 

making the provisions permanent or, 

at the very least, extending them. 

Mrs. MURRAY. Mr. President, I 

would like to agree with the points 

made by my colleagues. The timber tax 

provisions are critically important to 

Washington and other States that rely 

on timber jobs, and the provisions 

must be extended promptly. I have discussed this matter with the chairman 

of the Finance Committee, and he has 

assured me that he will work to extend 

the provisions early next year. 

Mr. BAUCUS. I am happy to respond 

to the Senators from Arkansas, Oregon, and Washington, whom I have 

worked with for several years on this 

issue. They and others have persuaded 

me that the timber tax provisions are 

fair and are important. That is why I 

strongly supported including the provisions in the farm bill. 

That said, I believe that the timber 

tax provisions are in a different category than the extenders that are included in the current bill. The extenders in this bill are provisions that have 

been in the Tax Code for some time, 

and most already have expired. The 

timber tax provisions, in contrast, are 

new—enacted earlier this year—and, as 

the Senator said, they do not expire 

until May 2009. In light of that, although I strongly support the timber 

tax provisions, I believe that it is better to address them early next year 

rather than as part of this bill. I anticipate that we will be considering tax 

legislation early in the next Congress. 

I will work with Senator LINCOLN, Senator MURRAY, and other interested 

Senators to see that the timber tax 

provisions are extended. 

Mr. GRASSLEY. I agree with the 

chairman of the Finance Committee. I 

support the timber tax provisions and 

believe they should be made permanent 

or at least extended. I also agree with 

Senator BAUCUS that we have time to 

consider the matter early next year, 

and I will work with him to pass a 

timely extension. 

Mr. DODD. Mr. President, I rise to 

discuss the intent in section 105(c) of 

the Emergency Economic Stabilization 

Act of 2008, ‘‘Regulatory Modernization 

Report,’’ of the important requirements for analysis of regulation of the 

over-the-counter swaps market and for 

recommendations regarding the enhancement of the clearing and settlement of over-the-counter swaps. 

The OTC swaps market is enormous, 

estimated to be $600 trillion. This market is primarily made up of interest 

rate swaps and Credit default swaps. 

Corporations, banks, insurance companies, GSEs, pension funds, State and 

local governments and endowments all 

participate in the OTC swaps market. 

The OTC swaps market is a ‘‘bilateral contract’’ market which does not 

involve an exchange or a clearinghouse. It is directly between two parties, which results in each party bearing ‘‘counter party credit risk.’’ In 

other words, if one of the two parties 

goes bankrupt or fails to pay, the other 

party can suffer a complete loss on the 

transaction. 

Since the OTC swaps market has impacts on the financial system, it is appropriate and timely to look at it carefully. Some of the largest OTC swaps 

market dealers and market participants have been merged in federally arranged transactions into stronger market participants, taken into Government conservatorships or receiverships 

or provided a line of credit directly by 

the Federal Government. These actions 

were taken, in part, because of concerns by Federal authorities about either the losses in their OTC swaps 

books and or the potential cascading 

effect on OTC swaps market if such an 

entity failed. 

The Treasury Report should look at 

the OTC swaps market generally and 

the current and potential options for 

improvements in clearing contracts, 

such as through a Federally licensed 

clearinghouse, with a view to whether 

it would materially lower credit risk. 

The Report should consider issues such 

as the processing of confirmations, 

margining, collateral management, 

market access, transparency in pricing, 

and safety and soundness concerns. 

Mr. President, I want to acknowledge 

the efforts of the many staff members 

who have labored almost around the 

clock over the past several weeks to 

help craft this legislation. 

FROM THE BANKING COMMITTEE

Amy Friend, Dean Shahinian, Jonathan 

Miller, Aaron Klein, Julie Chon, Jenn FogelBublick, Lynsey Graham, Brian Filipowich, 

Drew Colbert. 

FROM SENATOR GREGG’S COMMITTEE AND

PERSONAL STAFF

Denzel McGuire, Jim Hearn, Allison Parent, Christopher Gahan. 

FROM THE FINANCE COMMITTEE

Russ Sullivan, Cathy Koch, Mark Prater. 

FROM SENATOR CONRAD’S BUDGET COMMITTEE

AND PERSONAL STAFF

Mary Naylor, Tom Mahr, Lisa Konwinski, 

Matt Salomon, John Righter. 

FROM THE JUDICIARY COMMITTEE

Bruce Cohen, Kristine Lucius. 

FROM THE MAJORITY LEADER’S OFFICE

Bruce King, Mark Wetjen, Gary Myrick, 

Randy Devalk. 

FROM THE REPUBLICAN LEADER’S OFFICE

Rohit Kumar, Derek Kan. 

FROM THE OFFICE OF LEGISLATIVE COUNSEL

Laura Ayoud, Rob Grant, Didem Nisanci 

with Senator REID, David Stoopler with Senator SCHUMER. 

Last but not least, our extraordinary Floor 

Staff, led by Lula Davis and Dave Chiappa. 

f 

TRIBUTE TO SENATORS 

CHUCK HAGEL

Mr. MCCONNELL. Mr. President, 

with the end of a session fast approaching, it is time once again to say farewell to some of our favorite colleagues 

in the Senate. And today that includes 

our friend, the senior Senator from Nebraska. 

CHUCK HAGEL’s long record of service 

is well known to many. What some 

may not know is that that record of 

service long predates his time in Washington. 

Responsibility was thrust upon 

CHUCK at an early age. A fourth generation Nebraskan, CHUCK became the 

man of the house at the young age of 16 

after the death of his father. 


rfrederick on PROD1PC67 with SENATE