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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November 17, 2008 CONGRESSIONAL RECORD — SENATE S10551 

am immensely grateful to all who have 

served this great Nation. 

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TRIBUTE TO SENATORS 

LARRY CRAIG

Mr. INOUYE. Madam President, I 

rise to recognize the service of a great 

public servant and an outstanding leader. 

Senator CRAIG has served his home 

State of Idaho for 17 years in the U.S. 

Senate. He has been a fervent leader to 

the people of Idaho with unwavering 

devotion. 

Senator CRAIG has sought to establish Federal policies that respond to 

the needs and interests of Idahoans by 

constructing strong, sustainable rural 

communities, seeking access to adequate, affordable health care and developing natural resource and energy policies that protect the environment and 

keep consistency with economic 

growth. 

Senator CRAIG’s leadership in promoting economic development and 

strengthening American agriculture 

has led to the improvement of both agricultural studies and programs. His resilient leadership has helped to foster 

numerous programs in Idaho that will 

benefit agricultural entrepreneurship 

and help to strengthen the partnership 

between State and Federal groups. Senator CRAIG has truly served the people 

of Idaho with distinction. 

Madam President, I ask my colleagues to join me in paying tribute to 

this magnificent Senator. 

PETE DOMENICI

Madam President, I rise to recognize 

the service of a great public servant 

and an outstanding leader. 

Senator DOMENICI has been a tremendous and dedicated servant to his home 

State of New Mexico. His distinguished 

career spans 36 years, making him the 

first New Mexican to serve six full 6- 

year terms and the longest serving 

Senator of his State. 

Senator DOMENICI has been a devoted 

champion of the State of New Mexico. 

His relentless commitment to the people of New Mexico is evident to all who 

know him. As a respected leader in the 

Senate, he has pushed to strengthen 

energy security, curb nuclear proliferation, promote fiscal responsibility in 

the Federal budget, and has demonstrated profound leadership skills in 

his desire to continuously improve New 

Mexico’s economy. 

Among his many accomplishments 

and priorities, Senator DOMENICI has 

placed the importance of our future 

generation at the forefront. He recognizes the necessity of cultivating the 

young minds of today to ensure a 

bright future. Over a decade ago, Senator DOMENICI introduced the Character Counts Program into New Mexico’s school curriculum. Under the guidance of this program, schoolchildren 

learn the value of trustworthiness, respect, responsibility, fairness, caring, 

and citizenship as they build their 

character. Such traits are reflected in 

Senator DOMENICI. His legacy of public 

service has truly left its mark on Congress and will forever remain in the 

hearts of New Mexicans. 

Madam President, I ask my colleagues to join me in paying tribute to 

this magnificent Senator and friend. 

CHUCK HAGEL

Madam President, I rise to recognize 

the service of a great public servant 

and an outstanding leader. 

Senator HAGEL has been a committed 

and avid servant to his home State of 

Nebraska. He has served in Congress 

for two consecutive 6-year terms with 

ardent fervor for the welfare of Nebraskans and all Americans. 

Senator HAGEL has always placed the 

well-being of Nebraska and our Nation 

ahead of partisanship and personal feelings. He has been an earnest supporter 

of bipartisanship, recognizing the productivity that can accompany joint 

labor. His devotion to the people of his 

State and this Nation is apparent to 

any who know him. He has distinguished himself as a soldier and public 

servant of the people, demonstrating 

an exemplary character of which Nebraskans can be proud. 

Madam President, I ask my colleagues to join me in paying tribute to 

this magnificent Senator. 

WAYNE ALLARD

Madam President, I rise to recognize 

the service of a great public servant 

and an outstanding leader. 

Senator ALLARD has been a tremendous and dedicated servant to his home 

State of Colorado. His distinguished career spans 17 years in the U.S. Senate 

and the House of Representatives. 

Senator ALLARD has been a devoted 

champion of the State of Colorado. His 

tireless commitment to the people of 

Colorado is evident to all who know 

him. He has been an ardent supporter 

of increased national attention to the 

importance of savings plans and investments and small business concerns. 

Madam President, I ask my colleagues to join me in paying tribute to 

this magnificent Senator. 

JOHN WARNER

Madam President, I rise to recognize 

the service of a great public servant 

and an outstanding leader. 

Senator WARNER has been a tremendous and dedicated servant to his home 

State of Virginia and our Nation. His 

distinguished career spans 30 years in 

the U.S. Senate, making him the second longest serving U.S. Senator from 

Virginia. 

Senator WARNER has always placed 

the well-being of Virginia and the 

United States ahead of partisanship 

and personal feelings. He has been an 

ardent supporter for the men and 

women of the Armed Forces. As a respected leader, he pushed to modernize 

the structure and operations of the 

military to ensure its effectiveness in 

the 21st century. 

Madam President, I ask my colleagues to join me in paying tribute to 

this magnificent Senator. 

JOHN SUNUNU

Mr. CONRAD. Madam President, I 

rise today to honor my colleague, Senator JOHN SUNUNU, who will be leaving 

the Senate at the end of this term. 

Senator SUNUNU has represented the 

great State of New Hampshire for 12 

years in Congress, serving six of those 

years in the Senate. Senator SUNUNU

and I both served on the Finance Committee. Although we did not always 

agree, I found JOHN to be willing to 

work in a bipartisan manner to confront the major challenges that our 

great Nation faces. 

Raised in Salem, NH, JOHN SUNUNU

became interested in public service 

early in life when his mother served as 

chair of the local school board. JOHN

attended public school in Salem and 

later earned advanced degrees from the 

Massachusetts Institute of Technology 

and the Harvard Graduate School of 

Business. 

JOHN SUNUNU was elected to represent New Hampshire’s First Electoral 

District in the House of Representatives in 1996. In the House, JOHN served 

on the Budget and Appropriations 

Committees. He quickly rose in rank 

on the Budget Committee, becoming 

its vice chairman. In 2002, he was elected to represent the Granite State in 

this Chamber, becoming its youngest 

Member. 

JOHN and I worked together on numerous occasions. We both served on 

the Finance Committee This summer, 

JOHN joined the so-called ‘‘Gang of 

Ten’’ as it expanded from 10 to 20 members. Together, we sought pragmatic, 

bipartisan solutions to our Nation’s energy crisis. Senator SUNUNU also joined 

me in standing up for our Nation’s senior citizens and opposing cuts to Medicare-financed nursing home care. 

JOHN will be remembered for his commitment to individual liberties and 

limited Government. In the uncertainties of today’s world, Senator SUNUNU

has been a voice for preserving civil 

liberties in the light of increased law 

enforcement needs. 

I thank Senator SUNUNU for his years 

of public service and wish him and his 

family the best in the future. 

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HONORING OUR ARMED FORCES 

SERGEANT MICHAEL K. CLARK

Mr. SALAZAR. Madam President, it 

is with a heavy heart that I rise today 

to pay tribute to the life and service of 

SGT Michael Clark. A member of Fort 

Carson’s 3rd Brigade Combat Team, 

Sergeant Clark was killed on October 7 

when his foot patrol was ambushed in 

Mosul, Iraq. He was 24 years old. 

Sergeant Clark was on his second deployment to Iraq and in his fourth year 

of service in the 3rd Brigade. He was 

assigned to the brigade’s 1st Battalion, 

8th Infantry Regiment, and served as a 

fire support specialist, a job that requires quick thinking, unusually 

strong stamina, and a mastery of the 

techniques of target processing. In this 

urban, guerrilla-style conflict, where 

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