House Proceeding 03-18-09 on Mar 18th, 2009 :: 1:15:25 to 1:35:25
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1:11:55 to 1:15:25( Edit History Discussion )
Speech By: John Yarmuth

1:15:06 to 1:15:26( Edit History Discussion )

John Yarmuth: already today, the greatest disparity in wealth, between rich and everyone else in this country in its history. and also a basically an unsustainable and dangerous financial services sector. one that had got so big and created so little value that it jeopardized all of our society and our economy.

1:15:27 to 1:15:47( Edit History Discussion )

Stephen Cohen: so with that i'd like to yield again to my friend from memphis, the runner-up in the last poll, to my beloved louisville cardinals, mr. cohen. mr. cohen: thank you. i would like to ask either one of my colleagues. i know the hedge funds and they're involved in all of this as well. the hedge fund folks were making

1:15:30 to 1:16:10( Edit History Discussion )
Speech By: Stephen Cohen

1:15:48 to 1:16:09( Edit History Discussion )

Stephen Cohen: enormous amounts of money. unfathomable amounts of money. they are taxed at capital gains rates, which is like 15% instead of ordinary income which a personal on minimum wage is paying ordinary income. they're lower rate but still ordinary income. didn't we try to do something in the last congress to change that

1:16:10 to 1:16:11( Edit History Discussion )

Stephen Cohen: taxing scheme of the hedge funds

1:16:12 to 1:16:32( Edit History Discussion )

Bruce Braley: and find some problem and some pushback, maybe, from the administration, do y'all recall that? mr. braley: would you yield? mr. cohen: i'll yield to the gentleman from iowa. mr. braley: retried to get effective regulation but i'm

1:16:15 to 1:18:30( Edit History Discussion )
Speech By: Bruce Braley

1:16:33 to 1:16:53( Edit History Discussion )

Bruce Braley: confident that no action was taken because a lot of different reasons. but i think you've brought up a eat point. one that came up at this hearing that we had back on october 7, and that is that when i was in law school in 1980 to 1983 the insurance industry and the financial services sector was completely different than it is

1:16:54 to 1:17:14( Edit History Discussion )

Bruce Braley: today. one of the things that came out of the hearing was that a.i.g.'s insurance business was so successful which was why even though they lost $11 billion in their london office they only had a loss of $1.53 billion because of the offsets of their insurance business.

1:17:15 to 1:17:36( Edit History Discussion )

Bruce Braley: and their sole responsibility was to their policyholders. and then we had west saw a lot of blurrin various types of financial services providers. why is that importan well, in this case it's important because insurance companies going way back to the mckarine-ferguson act, had

1:17:37 to 1:17:58( Edit History Discussion )

Bruce Braley: oversight by the federal government. and when you see them providing insurance products branching into other types of financial services and vice versa you get a lot of confusion and then the big push, as my friend from louisville mentioned, is returning profits to shareholders, not providing a conservative return on

1:17:59 to 1:18:20( Edit History Discussion )

Bruce Braley: investments to protect policyholders. and so what happened has continued de-emphasis on deregulation was part of the federal approach to all of these products. we had things going on that were completely beyond the control of the average investor. in fact, these c.e.o.'s testified during the hearing that their understanding of

1:18:21 to 1:18:31( Edit History Discussion )

Bruce Braley: creditefault swaps was in fact quite limited, which is a shocking thing when you think of how deeply this company that they were shepherding was

1:18:32 to 1:18:53( Edit History Discussion )

Stephen Cohen: involved in this one high-risk financial investment tool. i'd yield back. mr. cohen: thank you, sir. let me ask a question of two of my colleagues. the hedge fund moneys, i thought we had a proposal on it and i thought it got passed through this house. that was an issue that came up. maybe there was a problem within the caucus as well on taxing the

1:18:35 to 1:19:15( Edit History Discussion )
Speech By: Stephen Cohen

1:18:54 to 1:19:14( Edit History Discussion )

Stephen Cohen: hedge fund folks at regular income. that's something that needs to happen because it's outrageous, the money that they make, and the moneys that they're taxed on is such a low percentage. there was a lot of deregulation. the banks were deregulated, the financial services and banks got

1:19:15 to 1:19:15( Edit History Discussion )

Stephen Cohen: doing different things than they

1:19:16 to 1:19:36( Edit History Discussion )

John Yarmuth: used to in savings and loans. do you believe that we need to go back to some of these types of regulations and get into a more conservative type of financial structure? mr. yarmuth: i thank my colleague. one of the reasons that no action was taken last year is the is to what you refer. also, it affects a lot of people

1:19:20 to 1:22:00( Edit History Discussion )
Speech By: John Yarmuth

1:19:37 to 1:19:58( Edit History Discussion )

John Yarmuth: who are building apartment complexes and other things so they're essentially businessmen and investors who form partnerships. and they would have been affected by the same change. and there was a considerable amount of question as to whether that was adviseable because we want to promote people to do apartment complexes and shopping

1:19:59 to 1:20:19( Edit History Discussion )

John Yarmuth: centers and so forth. and we couldn't quite figure out a way to make the distinction. that was, i think, one of the main reasons we didn't take action. in reference to your question, and i think our colleague from florida in his opening remarks. and that is it's not a question of whether we need massive

1:20:20 to 1:20:41( Edit History Discussion )

John Yarmuth: regulation or little regulation, we need the right regulation. and what we have failed to do over the last 20 years is to modernize our regulator system in such a way that it took recognition of the very changing picture of business, particularly in the financial sector. and i think this congress and i

1:20:42 to 1:21:02( Edit History Discussion )

John Yarmuth: know chairman frank of financial services, i know the administration is very much concerned with reshaping our regulatory system. again, not to overregulate the economy but to make sure we have the right type of regulation in place adapted to the current financial structure of the world so that these types of

1:21:03 to 1:21:24( Edit History Discussion )

John Yarmuth: situations don't recur. and i think that my colleague from iowa also mentioned something that we really need to look into as a congress and that is the whole q antitrust laws and which -- not just which industries are covered or not covered but also what -- what we can do and whether we should do something to in some way control the size

1:21:25 to 1:21:47( Edit History Discussion )

John Yarmuth: of businesses because what we've seen in many of these cases recently is we've businesses that quote-unquote are too big to fail. and i understand that there is a companies have worldwide operations and there is somewhat of a limit as to what we can do. but we havnot revisited the question of our antrust laws

1:21:48 to 1:22:00( Edit History Discussion )

John Yarmuth: and the size of corporations sometime in this country. i think the american people would appreciate that conversation because they don't see -- they don't like being in a position in which they are virtually helpless when a giant corporation which yields no

1:22:01 to 1:22:21( Edit History Discussion )

Bruce Braley: benefit to them that they perceive, anyway, is able to affect their lives so dramatically. .

1:22:05 to 1:24:25( Edit History Discussion )
Speech By: Bruce Braley

1:22:22 to 1:22:42( Edit History Discussion )

Bruce Braley: the floor of the house of representatives an exception to the rule which is there are too many companies that are too arrogant to save. this is an example what i'm talking about. i quoted this during the hearing on october 7, this is from a september 28, 2008, article of

1:22:43 to 1:23:03( Edit History Discussion )

Bruce Braley: "the new york times," and this was a comment made by the same joseph cassano who headed a.i.g.'s london office and who brought about this $11 billion first quarter loss that took them over the cliff. and here's what 'said. when asked to respond to this financial crisis.

1:23:04 to 1:23:25( Edit History Discussion )

Bruce Braley: he said, quote, it is hard for us, a.i.g., without being flip ant, to even see a scenario within any kind of realm of reason that would see us losing $1 in these circumstances. $1.

1:23:26 to 1:23:46( Edit History Discussion )

Bruce Braley: and then apparently he doesn't really have that, his math skills are somewhat lacking because he obviously earned a heck of a lot more than $1, $280 million over an eight-year period and that just shows the level of arrogance that these financial prognosticaters had. and i'd like to throw this

1:23:47 to 1:24:07( Edit History Discussion )

Bruce Braley: questionver to my friend from memphis. i mean, i remember when the fed was trying to have discussions about what type of financial oversight was appropriate for these new financial devices called mortgage-backed securities and credit default swaps. then fed chairman alan

1:24:08 to 1:24:25( Edit History Discussion )

Bruce Braley: greenspan was a firm believer in just let the market regulate self and in fact that's what his recommendation was on credit default swaps. so then we saw this market grow to a $100 trillion-plus market

1:24:26 to 1:24:46( Edit History Discussion )

Stephen Cohen: with no oversight and we should be shocked that anybody would be surprised that we'd find ourselves in this predicament. >> thank you, sir. the f.c.c. has a new leader, mrs. mary schapiro, i believe is her name, and i believe she's going to provide the regulation that we need and the past administration, the f.c.c. was woefully understaffed and i

1:24:30 to 1:26:10( Edit History Discussion )
Speech By: Stephen Cohen

1:24:47 to 1:25:07( Edit History Discussion )

Stephen Cohen: think when there were whistle blowers they weren't listened to. i believe if i'm correct there was a whistle blower on the may doff ponzi scream and there was a ponzi scream that was through dallas, texas, and through my city of memphis, with a company that has taken a lot of people's investments, claimed they were putting in buying

1:25:08 to 1:25:29( Edit History Discussion )

Stephen Cohen: c.d.'s, an island in the caribbean, i think antigua and in fact they weren't doing it and a lot of people have lost all of their investments. a lot of people lost all of their investments with anyway doff and they weren't regulated. that's what the f.c.c. needs to do is have regulations on all these companies to make sure they're doing what they say

1:25:30 to 1:25:51( Edit History Discussion )

Stephen Cohen: they're doing and have whistle blowers. this can save money invested in these areas can save people in the long run. there are people who wished we had spent that money because they're not going to have their monies and if they don't have their monies the going to hurt the treasury as well because they're not going to have money for spending. that's part of what' these problems. i believe you're on financial

1:25:52 to 1:26:11( Edit History Discussion )

Stephen Cohen: services, are you not? mr. braley: no, that would be my friend, mr. klein. mrcohen: mr. klein mht be the right person to ask. a lot of people have talked about mark to market changes. i believe mr. kanjorski talked about that today and also on the up-tick rule. are these two changes that might come about soon and do you think they'll be helpful in

1:26:12 to 1:26:33( Edit History Discussion )

Ron Klein: having a more fair and just and realistic perspective on the valuations and on trading in the stock market? mr. klein: would the gentleman yield? mr. cohen: i yield. mr. klein: mr. cohen, a couple of the issues that are out there, some of these are fairly technical but they're very important actually. for those people in banks, those people in real estate, financial service issues, one

1:26:15 to 1:28:45( Edit History Discussion )
Speech By: Ron Klein

1:26:34 to 1:26:54( Edit History Discussion )

Ron Klein: of the things that all of our smal and the people that own homes, the people that own real estate properties, commercial properties, is the banks are not lending. i mean, enough. ther there. but -- but all i can tell you is that when we had the eight large banks in front of our committee two weeks ago we

1:26:55 to 1:27:15( Edit History Discussion )

Ron Klein: heard, oh, we're lending here and billions of dollars here and that may have been to fortune 100 compans and i understand that and that's fine but it was not translating down to our local communities. i know in west palm beach, in delroy beach where we do business and things like that at home, and the short answer is, what can we and should we be doing?

1:27:16 to 1:27:36( Edit History Discussion )

Ron Klein: the mark to marketing rule basically is is a way that the regulators look at the bank's balance sheet and say that a certain asset is a certain value. and that works just fine when properties are going up in value. the problem is, when there's really no market, when y can't sell a piece of property because nobody wants to buy it or nobody can finance it, it's

1:27:37 to 1:27:57( Edit History Discussion )

Ron Klein: a very -- they get written down to not necessarily zero, but something very insignificant and what that does is put lots of pressure, put lots of pressure on the banks and their balance sheet. then they say, we can't lend because our balance sheet looks so small. it's a chicken-egg thing between the regulators and the banks. to make a long story short there's common ground that

1:27:58 to 1:28:18( Edit History Discussion )

Ron Klein: needs to be found. it's not a question of the banks shouldn't be lending, they should and the regulators, may be being a little cautious themselves right now under the circumstances but there's a middle ground and i think we have to find it and get -- crank it up quickly. because whether it's mark to market or a few other regulatory issues, we want to make sure our regulators are doing their job. doesn't mean stopping lending.

1:28:19 to 1:28:39( Edit History Discussion )

Ron Klein: but there are a whole lot of credit-worthy borrowers out there that could borrow. i mean, many of you have small businesses that are making payments, real estate owners that are making payments that are current. but they're saying i can't get a term loan, even though i'm current because they're saying the asset value is so low. on a simple basis we need to find that middle ground. think this through carefully.

1:28:40 to 1:28:46( Edit History Discussion )

Ron Klein: lend to the appropriate people, don't lend to people that shouldn't be borrowing, you else. but do it the right way.

1:28:47 to 1:29:09( Edit History Discussion )

Stephen Cohen: so, yeah, we are working on that right now, mr. cohen, and hopefully in the next number of weeks ey're going to have answers and get the banks moving along again. mr. cohen: thank you, mr. klein. it's an issue that i'vheard from a lot of brokers about. they think it would help the stock market but they also think the uptick rule would require people to at least own some stock and to have a trade take place before they shorted

1:28:50 to 1:29:40( Edit History Discussion )
Speech By: Stephen Cohen

1:29:10 to 1:29:30( Edit History Discussion )

Stephen Cohen: it and basically win by the committee losing. that's not the -- economy losing. that's not the american way. it's happening so much on the stock market and the way the stock market people have manipulated the market. hedge fund have manipulated the market to run companies, destroy them and make money while they did it. that's where regulation is so important and we haven't had

1:29:31 to 1:29:40( Edit History Discussion )

Stephen Cohen: regulation in this previous administration. the market didn't work. the market needs regulating because if you let people go unchecked, greed comes into play.

1:29:41 to 1:30:01( Edit History Discussion )

Bruce Braley: and we've seen the utmost of greed. i think mr. braley was something that will take mr. braley: would my friend yield for a follow-up comment? a point you raised, it's an important economyment to the

1:29:45 to 1:31:40( Edit History Discussion )
Speech By: Bruce Braley

1:30:02 to 1:30:23( Edit History Discussion )

Bruce Braley: regulation -- compliment and that's the whistle blower protection. one thing mr. yarmuth and i had a key role in was passing out of our oversight committee the whistle blower protection enhancement bill of 2007 and it was an enormously overwhelming bipartisan bill. it passed on the floor of this house with over 330 votes, w

1:30:24 to 1:30:44( Edit History Discussion )

Bruce Braley: naming a post office, that's doing pretty good down here. unfortunately it ran into obstacles inhe senate and did not get to the president's desk in the 110th congress. and then someone, well, it was congressman chris van hollen who is a democrat and congressman todd platts from pennsylvania who is a republican had the brilliant

1:30:45 to 1:31:06( Edit History Discussion )

Bruce Braley: idea when we were putting together some of this financial recovery legislation in the stimulus bill, let's put the whistle blower bill back in. we're putting a lot of money out there into the economy. we want to provide protection to federal employees, to report instances of waste, fraud and abuse and it passed ov to the senate and one senator

1:31:07 to 1:31:27( Edit History Discussion )

Bruce Braley: decided that that was not appropriate and it came out of the bill. and i think the american taxpayers are fed up with the lack of accountability. they want people to be protected. when they have the courage to put their lives and their careers on the line and stand up for the american taxpayers. and that's why we had a press conference last week to re-introduce the bill as a

1:31:28 to 1:31:41( Edit History Discussion )

Bruce Braley: stand-alone bill. i hope we quickly get it over to the senate and i hope this time the senate understands that the american people are outraged. they want us to be on their side to protect their hard-earned dollars and i think

1:31:42 to 1:32:02( Edit History Discussion )

John Yarmuth: this is a crical component we need to push and with that i'll yield to mr. yarmuth. mr. yarmuth: i thank my colleague and, you know, one of the things that we have to continue to do is to remind the american taxpayer what's happened, what broug this point.

1:31:45 to 1:35:20( Edit History Discussion )
Speech By: John Yarmuth

1:32:03 to 1:32:25( Edit History Discussion )

John Yarmuth: and i know that right now our colleagues on the other side are trying to play political games and all of a sudden because of this new revelation about bonuses, they want to make this all a democratic problem. but as all of us will recall and i think the american citizens will recall, we were

1:32:26 to 1:32:46( Edit History Discussion )

John Yarmuth: cruising along last year knowing that we were in a little bit of financial difficulty. we knew that the foreclosures were up, we knew that the signs of the economy were not where we would like them to be. those of white house had been in the trenches politically since 2006 knew a lot of americans had been hurting for a long time, particularly middle class americans and

1:32:47 to 1:33:08( Edit History Discussion )

John Yarmuth: hardworking families out there. but all of a sudden last september, out of the blue, seemingly, secretary paulson, chairman bernanke, call us all in and say, the sky is falling and we're about to go over the cliff and we need $700 billion to bail t these companies

1:33:09 to 1:33:29( Edit History Discussion )

John Yarmuth: that are in severe difficulty. and i think the american people rightly were stunned saying, where did this come from? i think all of us were stunned because we didn't know where it came from. and what we have found out subsequently is that in many of these operations, like a.i.g., sometimes the c.e.o.'s didn't

1:33:30 to 1:33:50( Edit History Discussion )

John Yarmuth: really know the depths of their problems. and i know we had hearings again in the oversight committee last congress where we talked to, for instance, -- for instance, the rating agencies and some of the people who were involved in the measurement of rk and the analysis of risk and even chairman greenspan who said we

1:33:51 to 1:34:13( Edit History Discussion )

John Yarmuth: had no way of assessing risk that involved declining real estate values. and all of the models they had built to assess the risk, whether it was moodie's or any of the rating agencies or in this case the fed, said, our computer models wouldn't accept negative growth in real estate.

1:34:14 to 1:34:34( Edit History Discussion )

John Yarmuth: so all of a sudden the american peopleay, whoa, where did this all come from? i think none of us really knew where it came from and the reason we didn't know is because we had trusted the marketplace to be the salvation of our financial system. and as we've seen, the marketplace, that chairman

1:34:35 to 1:34:55( Edit History Discussion )

John Yarmuth: greenspan worshiped and others, wanot capable of accounting for what happened in the real world. so now we're cleaning up, we're trying to pick up the pieces. the american people are rightly dismayed that their government was not on the job and we have an opportunity now to show the american people that they can

1:34:56 to 1:35:17( Edit History Discussion )

John Yarmuth: have confidence, not just in the economy, but also in their government. and that's a charge that i think all of us willingly accept. so i'm very happy to be here tonight to talk about that and to be a part of a congress that is responding to a crisis that basically we didn't build, we didn't create, but we are more

1:35:18 to 1:35:20( Edit History Discussion )

John Yarmuth: than willing to try to fix. because we owe thato the

1:35:21 to 1:35:41( Edit History Discussion )

Ron Klein: american taxpayer. and with that, i'd yield back to my colleague from florida. mr. klein: i thank the gentleman. i think you've summed it up exactly right. and that is, the american people want answers. they want to make sure this doesn't happen again. it's unacceptable for there to be cycles where this happens and you clean up and it happens again.

1:35:25 to 1:37:35( Edit History Discussion )
Speech By: Ron Klein