S10902 CONGRESSIONAL RECORD — SENATE December 11, 2008 

members of that committee speak as I, 

as if with one voice, how we appreciate 

his public service. He has great knowledge. He has great wisdom. It is tempered with a wonderful personality 

that is most studious and deliberative. 

Few have done as much to champion 

the cause of our men and women in the 

Armed Forces of the United States as 

JOHN WARNER. 

This Senator admires him for his 

sense of fairness, for his mutual respect 

of all the Members of the Senate. We 

know there has to be civility in the 

Senate for it to function. There has to 

be mutual respect. There has to be respect for the truth. There has to be respect for the dignity of individuals and 

those Senators’ families. All of that is 

certainly apropos of the senior Senator 

from Virginia. Over and over, I have 

been in situations with him that could 

have been adversarial. Yet his calm 

judgment and reason have brought people together. Of course, that is the admonition of the Good Book: ‘‘Come let 

us reason together.’’ 

Over and over, as I have sought his 

counsel on matters of some of the Nation’s highest secrets, JOHN WARNER

has provided the leadership and the 

clarity, as we have made those decisions, sometimes making those decisions together. 

So it is with a great reluctance on 

my part that I see our colleague, Senator WARNER, retire after a very distinguished and long career. It has been a 

privilege to serve with JOHN. I will 

miss him as a colleague. I will miss his 

leadership, his fairness, and his great 

capacity as a gentleman of the Senate. 

Madam President, I yield the floor 

and suggest the absence of a quorum. 

The PRESIDING OFFICER. 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order for the quorum call be rescinded.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. 

Mr. WHITEHOUSE. Madam President, I ask unanimous consent to speak 

for up to 15 minutes as in morning 

business. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

f 

AUTOMOBILE INDUSTRY CRISIS 

Mr. WHITEHOUSE. Madam President, I rise today to address what I feel 

is an unfortunate omission from our 

economic rescue strategy to date. This 

week, we are considering another bailout which would give $15 billion in socalled bridge loans to America’s struggling automakers. 

Now, when we debated a bailout program to protect our Nation’s financial 

system back in September, we created 

legislative branch roles and executive 

branch roles. We ultimately passed legislation that empowered the Department of the Treasury to invest up to 

$700 billion. Debate was rushed. The 

Treasury Secretary came to us on a 

Friday in September and told leaders 

of both parties in both Houses that our 

economy would collapse if we did not 

take immediate action. With the 

threat of immediate financial calamity 

and the apparent good faith of Secretary Paulson, Congress moved quickly to pass the best bill we could. Senator CHRIS DODD of Connecticut and 

my colleague from Rhode Island, Senator JACK REED, worked heroically, almost around the clock, to negotiate for 

taxpayer protections and several levels 

of oversight. In the end, we created a 

program of congressional and executive 

roles but no judicial role. We ignored 

the role that courts can play here or, 

more correctly, that executive agencies can play when supported by judicial or even quasi-judicial due process. 

We are about to ignore that role again 

in the auto bailout. 

Why is this point important? This is 

important because under our American 

system of government, there are important powers of government that can 

only be exercised after due process opportunity for a hearing. The famous 

Supreme Court case of Fuentes v. 

Shevin is on point. I quote: 

The constitutional right to be heard is a 

basic aspect of the duty of government to 

follow a fair process of decision-making 

when it acts to deprive a person of his possessions. 

That is citation 407 U.S. 67 at 82. 

In other words, some means of restructuring require due process if they 

involve adjusting people’s financial 

rights and claims. When we fail to provide that process, we unilaterally disarm government’s response, taking 

away its ability to restructure using 

those means. 

The price of this repeated omission 

has been high. Going back before we 

even got into this current mess, when 

there was only a subprime mortgage 

problem, Senator DURBIN of Illinois 

proposed a bill that would have empowered bankruptcy judges to modify the 

terms of a mortgage on a person’s primary residence. One needed a due process hearing such as that in order to adjust the rights within that mortgage of 

the banks and the myriad investors 

who bought strips of that mortgage 

when it was carved up and sold to the 

four winds. Our Republican colleagues 

stymied this provision which we now 

see could have kept tens of thousands 

of families in their homes. Because the 

clarity and finality of a court decision 

on a troubled mortgage was not available, there was little alternative to 

foreclosure, and troubled mortgages, 

by the tens of thousands, cascaded into 

foreclosure—numbers never before seen 

in our history. Our fault. Bad design. 

And every day we don’t get it right, 

every day we don’t pass Senator DURBIN’s bill, that foreclosure problem 

worsens. 

Similarly, as part of the $700 billion 

Wall Street bailout, we could have addressed lavish and indefensible executive compensation by providing for 

some judicial power to restructure 

these packages. Because we didn’t, 

these grotesque liabilities remain on 

the books of the bailed out entities as 

obligations to their disgraced management. According to an analysis by the 

Wall Street Journal, the executive deferred compensation obligations of 

bailed out Wall Street firms amount to 

more than $40 billion. Banks participating in the bailout program carried 

these obligations on their books, and 

the cash from our bailout is being used 

to pay them—or will be used to pay 

them. Taxpayer dollars will end up in 

the pockets of the scoundrels who 

tanked those firms. I contend we have 

to find ways in which the court system, 

due process, can be brought to bear on 

this problem. But again, the inaction 

on that so far is our fault. Bad design. 

Unilateral disarmament in the face of 

the Wall Street meltdown. 

Now we have the auto bailout plan 

with its provision for a ‘‘car czar,’’ but 

once again, lacks a role for those due 

process powers of government. Once we 

are committed to this deal—once we 

are in—the only tool we will have at 

that negotiating table is Uncle Sam’s 

checkbook—that, and the somewhat 

improbable threat to walk away and 

tank the auto companies after having 

put $15 billion into them. So now we 

will have to negotiate about the companies’ continuing lavish executive and 

board compensation packages and 

other obligations impeding a fair and 

rational recovery. As for looking backwards at preexisting obligations, as we 

say in Rhode Island, forget about it. 

That requires due process. We have created no process to even invoke government’s power to review those. So the 

effect of all of this is to encourage special interests to play the holdout in the 

auto negotiations and dare us to tank 

the companies. It is going to be a high 

stakes game of chicken and, no matter 

who wins, the taxpayers lose. 

We created this ‘‘hold out’’ problem 

by not providing a judicial role in the 

restructuring. We could, for example, 

give the car czar the powers of a judicially appointed conservator or receiver—those are roles I have held—and 

the power to go to court for an order 

approving his plan or her plan over the 

objections of any holdouts. If we did 

that, it would change the bargaining 

position of the holdouts. This judicial 

due process would allow the strong 

powers of government that require due 

process to be brought to bear on this 

mess. We do this in a lot of different 

contexts. 

Bankruptcy courts oversee restructuring all the time and so do other 

quasi-judicial bodies. For example, the 

FDIC has the power under current law 

to place a troubled bank into receivership and wind it down as if in chapter 

7, or put it under conservatorship to restructure it as if in chapter 11. The 

bankruptcy courts and the FDIC possess the tools necessary to cut through 

whatever Gordian knots may snarl restructuring plans absent that power. 

December 11, 2008 CONGRESSIONAL RECORD — SENATE S10903 

The judicial imprimatur will also increase public confidence in the fairness 

and the propriety of these plans. There 

is flexibility about how we do this. We 

don’t have to have it be the FDIC. We 

don’t have to have it be a bankruptcy 

court to recognize the due process powers of government. 

Fuentes v. Shevin again, and I quote: 

Due process tolerates variances in the form 

of a hearing ‘‘appropriate to the nature of 

the case,’’ and ‘‘depending upon the importance of the interests involved and the nature of the subsequent proceedings, if any.’’ 

I hope my colleagues will recognize 

the importance of authorizing judicially supervised powers in these bailout plans. I pledge to work hard with 

anyone who wants to achieve this goal. 

It is vital, I contend, to recognize that 

directed judicial oversight expands 

government’s powers and authorities 

to do the things the public and the circumstances demand. It gives us a 

means to unsnarl the foreclosure mess 

on Main Street, to restructure obscene 

executive compensation on Wall 

Street, and to force good-faith negotiations in Detroit. 

We cannot ignore the judicial power 

in restructuring companies and industries. We must not let that sword sleep 

in our hands. Times are bleak in Detroit, as they are around the country. 

The automobile industry stands on the 

brink of collapse, and the jobs of thousands—some say millions—of workers 

hang in the balance. 

Michigan shares the sad distinction 

with my home State of Rhode Island in 

having the Nation’s highest unemployment rate, 9.3 percent, in October. 

Families are struggling in Rhode Island and across the country. That is 

the background against which we must 

consider whether to bail out yet another industry. In making such a 

weighty decision, I implore my colleagues, we must not consider just 

whether but how we go about doing 

this. 

I contend that we should empower 

our Government to take steps that we 

have, to date, foreclosed—steps that 

exercise the power of Government that 

can be only exercised after due process 

of law. I hope we consider that. 

Madam President, I ask unanimous 

consent that the Wall Street Journal 

article to which I referred be printed in 

the RECORD. 

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

RECORD, as follows: 

[The Wall Street Journal, October 31, 2008] 

BANKS OWE BILLIONS TO EXECUTIVES

(By Ellen E. Schultz) 

Financial giants getting injections of federal cash owed their executives more than 

$40 billion for past years’ pay and pensions as 

of the end of 2007, a Wall Street Journal 

analysis shows. 

The government is seeking to rein in executive pay at banks getting federal money, 

and a leading congressman and a state official have demanded that some of them make 

clear how much they intend to pay in bonuses this year. 

But overlooked in these efforts is the total 

size of debts that financial firms receiving 

taxpayer assistance previously incurred to 

their executives, which at some firms exceed 

what they owe in pensions to their entire 

work forces. 

The sums are mostly for special executive 

pensions and deferred compensation, including bonuses, for prior years. Because the liabilities include stock, they are subject to 

market fluctuation. Given the stock-market 

decline of this year, some may have fallen 

substantially. 

Some examples: $11.8 billion at Goldman 

Sachs Group Inc., $8.5 billion at J.P. Morgan 

Chase & Co., and $10 billion to $12 billion at 

Morgan Stanley. 

Few firms report the size of these debts to 

their executives. (Goldman is an exception.) 

In most cases, the Journal calculated them 

by extrapolating from figures that the firms 

do have to disclose. 

Most firms haven’t set aside cash or stock 

for these IOUs. They are a drag on current 

earnings and when the executives depart, 

employers have to pay them out of corporate 

coffers. 

The practice of incurring corporate IOUs 

for executives’ pensions and past pay is perfectly legal and is common in big business, 

not limited to financial firms. But liabilities 

grew especially high in the financial industry, with its tradition of lavish pay. 

Deferring compensation appeals both to 

employers, which save cash in the near term, 

and to executives, who delay taxes and see 

their deferred-pay accounts grow, sometimes 

aided by matching contributions. In some 

cases, firms give top executives high guaranteed returns on these accounts. 

The liabilities are an essentially hidden 

obligation. Even when the debts to their executives total in the billions, most companies lump them into ‘‘other liabilities’’; only 

a few then identify amounts attributable to 

deferred pay. 

The Journal was able to approximate companies’ IOUs, in some cases, by looking at an 

amount they report as deferred tax assets for 

‘‘deferred compensation’’ or ‘‘employee benefits and compensation.’’ This figure shows 

how much a company expects to reap in tax 

benefits when it ultimately pays the executives what it owes them. 

J.P. Morgan, for instance, reported a $3.4 

billion deferred tax asset for employee benefits in 2007. Assuming a 40% combined federal 

and state tax rate—and backing out obligations for retiree health and other items—implies the bank owed about $8.2 billion to its 

own executives. A person familiar with the 

matter confirmed the estimate. 

Applying the same technique to Citigroup 

Inc. yields roughly a $5 billion IOU, primarily for restricted stock of executives and 

eligible employees. Someone familiar with 

the matter confirmed the estimate. 

The Treasury is infusing $25 billion apiece 

into J.P. Morgan and Citigroup as it seeks to 

get credit flowing. In return, the federal government is getting preferred stock in the 

banks and warrants to buy common shares. 

The Treasury is injecting $125 billion into 

nine big banks and making a like amount 

available for other banks that apply. 

It’s imposing some restrictions on how 

they pay top executives in the future, such 

as curtailing new ‘‘golden parachutes’’ and 

barring a tax deduction for any one person’s 

pay above $500,000. But the rules won’t affect 

what the banks already owe their executives 

or make these opaque debts more transparent. 

Asked about the Journal’s calculation, the 

Treasury said, ‘‘Every bank that accepts 

money through the Capital Purchase Program must first agree to the compensation 

restrictions passed by Congress just last 

month—and every bank that is receiving 

money has done so.’’ 

Bear Stearns Cos., the first financial firm 

the U.S. backstopped, owed its executives 

$1.7 billion for accrued employee compensation and benefits at the start of the year, according to regulatory filings. When Bear 

Stearns ran into trouble after investing 

heavily in risky mortgage-backed securities, 

the government stepped in, arranging a sale 

of the firm and taking responsibility for up 

to $29 billion of its losses. 

The buyer, J.P. Morgan, says it will honor 

the debt to Bear Stearns executives, which it 

said is shrunken because much of it was in 

stock that sank in value. 

J.P. Morgan will also honor deferred-pay 

accounts at another institution it took over, 

Washington Mutual Inc. It couldn’t be determined how big this IOU is. J.P. Morgan’s 

move will leave the WaMu executives better 

off than holders of that ailing thrift’s debt 

and preferred stock, who are expected to see 

little recovery. J.P. Morgan’s share of the 

federal capital injection is $25 billion. 

Obligations for executive pay are large for 

a number of reasons. Even as companies have 

complained about the cost of retiree benefits, they have been awarding larger pay and 

pensions to executives. At Goldman, for example, the $11.8 billion obligation primarily 

for deferred executive compensation dwarfed 

the liability for its broad-based pension plan 

for all employees. That was just $399 million, 

and fully funded with set-aside assets. 

The deferred-compensation programs for 

executives are like 401(k) plans on steroids. 

They create hypothetical ‘‘accounts’’ into 

which executives can defer salaries, bonuses 

and restricted stock awards. For top officers, 

employers often enhance the deferred pay 

with matching contributions, and even assign an interest rate at which the hypothetical account grows. 

Often, it is a generous rate. At Freddie 

Mac, executives earned 9.25% on their deferred-pay accounts in 2007, regulatory filings show—a better deal than regular employees of the mortgage buyer could get in a 

401(k). Since all this money is tax-deferred, 

the Treasury, and by extension the U.S. taxpayer, subsidizes the accounts. 

In addition, because assets are rarely set 

aside for executive IOUs, they have a greater 

impact on firms’ earnings than rank-and-file 

pension plans, which by law must be funded. 

Bank of America Corp.’s $1.3 billion liability for supplemental executive pensions reduced earnings by $104 million in 2007, filings 

show. By contrast, the bank’s regular pension plan is overfunded, and the surplus 

helped the plan contribute $32 million to 

earnings last year. 

While disclosing its liability for executive 

pensions, the bank doesn’t disclose its IOU 

executives’ deferred compensation, and it 

couldn’t be calculated. The bank’s share of 

the federal capital injection is $25 billion. 

Bank of America has agreed to acquire 

Merrill Lynch & Co. Merrill is a rare example of a firm that has set aside assets for its 

deferred-pay obligation: $2.2 billion, matching the liability. Morgan Stanley also says 

its liability for executives’ deferred pay is 

largely funded. 

To be sure, deferred-compensation accounts can shrink. Those of lower-level executives usually track a mutual fund, and 

decline if it does. Often the accounts include 

restricted shares, which also may lose value, 

especially this year. To the extent financialfirm executives were being paid in restricted 

stock, many have lost huge amounts of 

wealth in this year’s stock-market plunge. 

The value of Morgan Stanley Chief Executive John Mack’s deferred-compensation account declined by $1.3 million in fiscal 2007, 

to $19.9 million; much of it was in company 

shares. Mr. Mack didn’t accept a bonus in 

2007. 

S10904 CONGRESSIONAL RECORD — SENATE December 11, 2008 

Executives can even lose their deferred pay 

altogether if their employer ends up in bankruptcy court. When Lehman Brothers Holdings Inc. filed for bankruptcy last month, 

most executives became unsecured creditors. 

The government didn’t come to Lehman’s 

aid. 

In assessing liabilities, the Journal examined federal year-end 2007 filings by the first 

nine banks to get capital injections, plus six 

other banks and financial firms embroiled in 

the financial crisis. In many cases, the firms 

didn’t report enough data to estimate their 

obligations to executives. As for identifying 

amounts due individual executives, company 

filings provided a look at only the top few, 

and not a full picture of what they were 

owed. 

Just as banks aren’t the only financial 

firms getting federal aid amid the crisis, 

they aren’t the only ones facing scrutiny of 

their compensation programs. 

Struggling insurer American International 

Group Inc. agreed to suspend payment of deferred pay for some former top executives 

pending a review by New York state Attorney General Andrew Cuomo. Mr. Cuomo is 

also demanding to know this year’s bonus 

plans for the first nine banks getting federal 

cash, as is House Oversight Committee 

Chairman Henry Waxman. 

Among the payouts AIG agreed not to 

make are disbursements from a $600 million 

bonus pool for executives of a unit that ran 

up huge losses with complex financial products. AIG also is suspending $19 million of 

deferred compensation for Martin Sullivan, 

whom AIG ousted as chief executive in June. 

His successor as CEO, Robert Willumstad, 

who left when the U.S. stepped in to rescue 

AIG in September, has said he’s forgoing $22 

million in severance because he wasn’t there 

long enough to execute his strategy for AIG. 

However, the giant insurer—whose total liability for its executives’ deferred pay 

couldn’t be calculated—says most of the 

managers will receive the compensation. ‘‘Of 

course, we’ll be looking at all these to make 

sure they’re consistent with the requirement 

of the program,’’ said spokesman Nicholas 

Ashooh. 

AIG isn’t eligible for the government’s capital-injection plan, since it’s not a bank, but 

it’s getting plenty of U.S. aid of another 

sort. The Treasury has made $123 billion of 

credit available, a little more than twothirds of which MG has borrowed so far. 

Fannie Mae and Freddie Mac also don’t get 

in on the capital-injection plan for banks. 

But under a federal ‘‘conservatorship,’’ the 

Treasury agreed to provide each with up to 

$100 billion of capital if needed. In return, 

the government got preferred shares in the 

firms and the right to acquire nearly 80% of 

them. 

Their regulator, the Federal Housing Finance Agency, says it will bar golden-parachute severance payouts to the mortgage 

buyers’ ousted chief executives. The executives remain eligible for their pensions. 

Fannie Mae had a liability of roughly $500 

million for executive pensions and deferred 

compensation at the end of 2007, judging by 

the size of its deferred tax assets. A spokesman for the firm wouldn’t discuss the estimate or whether the executives would get 

the assets. 

At Freddie Mac, most will. ‘‘Deferred compensation belongs to the officers who earned 

it,’’ said Shawn Flaherty, a spokeswoman. 

Indeed, in September Freddie Mac made its 

deferred-compensation plan more flexible, 

allowing executives to receive their money 

earlier than initially spelled out. ‘‘Officers 

were nervous about market changes,’’ said 

Ms. Flaherty. ‘‘We wanted a retention tool 

for top talent.’’ 

Mr. WHITEHOUSE. I thank the 

Chair, yield the floor, and I suggest the 

absence of a quorum. 

The PRESIDING OFFICER. The 

clerk will call the roll. 

The assistant legislative clerk proceeded to call the roll. 

Mr. LEVIN. Madam President, I ask 

unanimous consent that the order for 

the quorum call be rescinded. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

Mr. LEVIN. Madam President, I ask 

unanimous consent that the Presiding 

Officer, the Senator from Missouri, be 

recognized for up to 5 minutes, and 

that I be recognized for 30 minutes in 

morning business. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

Mr. LEVIN. I suggest the absence of 

a quorum. 

The PRESIDING OFFICER. The 

clerk will call the roll. 

The legislative clerk proceeded to 

call the roll. 

Mrs. MCCASKILL. Mr. President, I 

ask unanimous consent that the order 

for the quorum call be rescinded. 

The PRESIDING OFFICER (Mr. 

LEVIN). Without objection, it is so ordered. 

Mrs. MCCASKILL. Mr. President, I 

know we have an important piece of 

legislation that we are going to vote on 

today. I desperately want to support 

that legislation. I wish to ask first and 

most importantly if anyone has the information as to whether the CEOs of 

Wells Fargo or Bank of America or 

Citigroup have taken private jets in 

the last month. Has anyone asked the 

CEOs of Citigroup, Wells Fargo—all of 

these financial companies—to take a 

cut in compensation? Has anyone 

asked about their workers and how 

much money they make and whether 

they are overpaid and whether they are 

competitive with the salaries of community bankers across the country? 

Every one of the institutions I named 

has gotten $15 billion or more of taxpayer money. Think about that for a 

minute. Citigroup has gotten $50 billion. Have we checked on their private 

jets? Have we checked on their CEO 

compensation? Have we checked on 

their work rules and whether their 

workers are given enough flexibility? 

It is unbelievable to me that we are 

setting this double standard. The thousands of jobs and families who build 

great American cars do not deserve 

this incredible hypocrisy in terms of 

the different treatment they are getting. What is good for the goose is good 

for the gander. 

I say let’s call in those CEOs of those 

big companies that have gotten more 

than $15 billion of our money and ask 

them when they are going to take a 

dollar in pay, ask them if they got here 

on a corporate jet, ask them if their 

workers have cut their pay to $14 an 

hour, ask them if they have talked 

about cutting their pension costs and 

their health care costs. Until we do 

that, we ought to be quiet about the 

American autoworkers, and we ought 

to be quiet about these companies that 

have reduced fixed costs, that have 

agreed to sell corporate jets, that have 

agreed to cut executive compensation. 

I want to support this bill on behalf 

of manufacturing in the United States 

of America, on behalf of wonderful, 

hard-working families in Missouri. 

However, there is one problem that has 

arisen, and that is, unfortunately, in 

this bill right now, as written, is a provision to increase the pay of Federal 

judges. Wrong time, wrong place. 

We have unemployment numbers 

today that show we have the highest 

unemployment in this country we have 

had in decades. We have families all 

over this Nation who are scared today, 

who are not buying Christmas presents. Federal judges get lifetime appointments and they never take a 

dime’s cut in pay. They die with the 

same salary they have today. My phone 

is ringing off the hook from people who 

want to be Federal judges. I am having 

to have staff work overtime to handle 

all the phone calls I am getting from 

people who think there may be a Federal judgeship opening in the eastern 

district of Missouri and how badly accomplished, wonderful, smart lawyers 

want that Federal appointment. 

We are not hurting for qualified applicants for the Federal judiciary. Is it 

fair that they have not gotten a costof-living increase like every other Federal employee? Probably not. But you 

know what is a lot more unfair is to 

give somebody with a lifetime appointment, great health care, no cut in pay 

when they actually retire, what is unfair is to give them a pay raise on this 

day in this bill at this time. It is not 

the right time. And if it is in the bill, 

I regrettably will have to vote against 

this legislation because I feel so 

strongly that it sends the wrong message to the United States of America 

at this scary moment in our economic 

history. 

Mr. President, I suggest the absence 

of a quorum. 

The PRESIDING OFFICER. The 

clerk will call the roll. 

The legislative clerk proceeded to 

call the roll. 

Mr. LEVIN. Madam President, I ask 

unanimous consent that the order for 

the quorum call be rescinded. 

The PRESIDING OFFICER (Mrs. 

MCCASKALL). Without objection, it is 

so ordered. 

f 

ORDER FOR RECESS 

Mr. LEVIN. Madam President, I ask 

unanimous consent that at the conclusion of my remarks, the Senate stand 

in recess until 3 p.m. 

The PRESIDING OFFICER. Without 

objection, it is so ordered. 

f 

DOMESTIC AUTOMOBILE 

INDUSTRY 

Mr. LEVIN. Madam President, the 

bill that has been filed by the chairman