THE ECONOMY -- (Senate - September 18, 2008)
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Ms. STABENOW. Mr. President, I thank my friend from New Hampshire, Senator JUDD GREGG, for allowing me to speak, rather than going back and forth. I ask unanimous consent that he be recognized following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
Ms. STABENOW. Mr. President, I rise to discuss the recent collapse in the financial markets and the Republican economic policies that have brought us to this point.
On Monday, Lehman Brothers filed for the largest bankruptcy in American history. This collapse will hurt hardworking Americans' ability to access credit and could deteriorate their pension plans. For example, the city of Detroit's general retirement system that had invested in the bank could lose up to $25 million.
Can you imagine what would have happened if Social Security had been privatized?
This failure occurs as Bank of America announced that it was buying Merrill Lynch and the Federal Reserve announced it was taking over the world's largest insurer, AIG, for the staggering cost of $85 billion. Washington Mutual is still struggling to survive their investments tied to the mortgage market.
As a result of these events, the Dow Jones dropped more than 500 points on Monday--the biggest drop since September 11, and Wednesday it dropped almost 450 points.
These announcements come as middle-class families face the highest unemployment rate in 5 years, record home foreclosures, and skyrocketing gas and grocery prices.
Despite these conditions, our colleague, Senator McCain responded that ``the fundamentals of our economy are strong.'' I would like him to tell that to the 84,000 Americans who lost their jobs, or the 91,000 families who lost their homes last month, or the 605,000 Americans who have lost their job since January.
And now, Senator McCain's solution is to create a commission to study the problem. Middle-class families don't need a study to tell them that we're in an economic crisis.
They see it every day when they try to fill up their gas tanks or put food on the table.
They have known it for the past 8 years, as they have watched jobs sent overseas and their pensions disappear.
Unlike Senator McCain's economic adviser, Phil Gramm, middle-class families don't need a study to tell them that this isn't a ``mental recession.'' What they need are real economic solutions and not 4 more years of the same failed economic policies.
So one of the question I know Michigan families have is, how did we get here? Unfortunately, these failed policies go back for some time.
One example can be seen under the Republican Congress, when McCain's former economic adviser Senator Phil Gramm slipped a provision known as the ``Enron loophole'' into the 11,000-page appropriations bill on a Friday night before recess.
This provision allowed financial institutions to trade an unlimited amount of energy commodities on dark, over-the-counter markets that are beyond the jurisdiction of the Commodities Futures Trading Commission.
Only now, with Democrats in the majority, are we seeing any accountability as we closed the Enron loophole. However, trading on the bilateral swaps markets and the electronic trading facilities are still conducted on these dark markets with no transparency or regulation.
The Commodities Futures Trading Commission only has the power to get information on these markets on an ad hoc basis so speculative investors continue to pour money into the markets without any oversight.
Yet Republicans continue to oppose providing more authority and resources to the CFTC.
Authority that would allow necessary regulation of our commodities markets and protection against manipulative behavior that could influence the price of food and gas for every American.
This just reiterates the failed philosophy of President Bush, John McCain and Republican economics that believe in less oversight, less accountability--more greed--at the expense of American families.
Nowhere is this seen clearer than what is happening in the housing market-- the root of our current crisis. The lack of regulation and oversight by the Bush administration allowed for predatory lending to flourish.
In 1994, Congress gave the Federal Reserve the authority to prohibit these unfair and deceptive lending practices. The Fed waited 14 years before implementing regulations.
Senators Schumer, Sarbanes, and Dodd introduced legislation to protect homeowners from predatory lending. No Republicans cosponsored these bills.
Then in 2004, despite warnings, the Fed actually promoted nontraditional mortgages over fixed-rate mortgages, resulting in the skyrocketing use of ARM and subprime mortgages.
In 2006, regulators finally finalized rules over nontraditional mortgage products, but it did not apply to subprime mortgages.
The Democratic-led Congress held oversight hearings, spoke out time and time again, and yet the administration still sat back and did nothing.
In 2007, the Treasury was still downplaying the subprime crisis by explaining that it was ``largely contained'' and admitting they ``could have done more sooner.''
The Republican philosophy of no public accountability and unlimited greed created markets where these risky mortgages, that they promoted, were packaged and sold as complex debt securities without any oversight. Then, without any regulation, credit rating agencies were allowed to inflate the value of these complex securities and assign triple-A ratings despite their inherent risks.
Greed continued to fuel the vicious cycle until our financial industry was completely entangled in these risky securities.
When homeowners defaulted on their loans, it sent ripple effects throughout the entire economy, bringing down the large banks that had invested in the mortgage market, such as Bear Stearns and Lehman Brothers.
Time and time again, Democrats have tried to enact changes, but every attempt has been blocked by Republicans.
In 2005, the House of Representatives passed a bill that would have created a new regulator to oversee government sponsored enterprises--providing the authority to set capital requirements and limit portfolio size.
When I was on the Banking Committee, we worked to enact this legislation, but we were blocked by the Bush administration.
This session Democrats introduced legislation to strengthen regulation over government sponsored enterprises, to keep families in their homes and help communities struggling with foreclosures.
Republicans opposed this legislation and, while more families lost their homes to foreclosures, they continued to block the bill for months.
Only after Fannie and Freddie reached the point of crisis did the administration finally lift their opposition, further highlighting the inherent problems with the Bush/McCain economic philosophy--it is always too little too late.
Now while Republicans have let the markets ``work it out,'' small businesses and families are faced with tightening credit markets, job losses, increased foreclosures and a loss of confidence in our economy.
Each of these examples shows the fundamental failures of the Bush/McCain economic policies. Policies that are based on greed as a national virtue and high profits at any cost. Policies that send American jobs overseas while increasing tax breaks for big oil.
Our economy cannot take another 4 years of this failed policy; American families cannot take another 4 years. Out country can do better. It is time for a change.
We are in a very important discussion right now, not only about what we need to do together to move our country forward, but it is important to talk about how we got here, because how we got here matters. Critiquing the philosophy that got us here matters, if we are not going to repeat it in the future. When we sum it up, when I look at what I call ``Republican economics 101,'' it is more deregulation. We heard it again today. I heard it from one of my colleagues today, the problem with all of this is that we need more deregulation, more deregulation. Lack of accountability, I call it, lack of transparency. More home foreclosures have come from Republican economics 101, more jobs lost, more tax breaks for the wealthy. That seems to be the answer to everything: Lose your job, let's have another tax cut for the wealthy. Lose your house, let's have another tax cut for the wealthy. Can't pay for gas at the pump? How about another tax cut for the wealthy. Financial markets exploding? Let's have another tax cut for the wealthy. That seems to be the mantra of the Republican economics 101 theme. More excessive profits for oil companies which have translated into $5 at the pump.
The bottom line is, we don't want more of the same. That is why it does matter how we got here. We do not want more of the same. The American people cannot take more of the same. Enough is enough. That is certainly what the people in Michigan are saying.
Let me specifically speak to what has occurred this week. On Monday, Lehman Brothers filed for the largest bankruptcy in American history. This collapse will hurt the people of Michigan, hard-working Americans' ability to access credit, and could very well deteriorate pension plans. For example, we heard yesterday the city of Detroit's general retirement system that has invested in the bank could lose as much as $25 million. I am sure that is only one example. Imagine what would have happened if President Bush had succeeded, with John McCain's support, in privatizing Social Security. I will never forget what happened after Enron, when I had former employees come in to me who had lost everything, trusted the company, invested in the company, lost everything. They said: Thank God for Social Security. It is the only thing I have left.
Imagine if the Republican philosophy of privatizing had happened. One of the things I am most proud about in working with our Democratic leadership and our majority is we were totally together in blocking the President from proceeding. It was one of the most important achievements as a Democratic majority, stopping the President, John McCain, and others who wanted to privatize Social Security. We now know that the failure of Lehman Brothers occurred as Bank of America announced it was buying Merrill Lynch and the Federal Reserve announced it was taking over the world's largest insurer, AIG, for the staggering cost of $85 billion. Washington Mutual is still struggling to survive their investments tied to the mortgage market. As a result, we have all seen the Dow Jones drop more than 500 points on Monday, the biggest drop since September 11, 2001. Wednesday it dropped almost 450 points.
Most importantly is how this affects families, how it affects middle-class Americans who are working hard every day. They are playing by the rules. They expect our Government to enforce the rules and enforce accountability. They are being hit with the highest unemployment rate in 5 years. It went up again yesterday, unbelievably, to now in Michigan an 8.9 percent unemployment rate. That doesn't count people who have been unemployed so long they are not a part of the system anymore, or the people who are working one job, two jobs, three jobs, part-time jobs trying to hold it all together, hoping maybe one of them will have health insurance, maybe just one of them, for their families.
We have seen record home foreclosures for families, skyrocketing gas and grocery prices. These are the consequences of the reckless policies I am most concerned about.
Despite these conditions, our colleague John McCain responded--and he said it more than once; 16, 17 times at least that I know of--the fundamentals of the economy are strong. He is now saying that he meant the American people, the American worker. I know the American worker is strong and productive and hard-working. But we all know that is not what was meant by that comment, the fundamentals of the economy are strong. He and Herbert Hoover share those comments, the gilded age of the 1920s, when the wealthy got wealthier and wealthier and wealthier, until the system crashed and a great Democratic leader, Franklin Delano Roosevelt, came into office and put the American people first, put people back to work and created Social Security and began to rebuild the country. We are at one of those times where we need that kind of leader to rebuild for the American people and create jobs and put people back to work.
I would like Senator McCain and others who believe the fundamentals of the economy are strong to tell that to 84,000 Americans who lost their jobs or the 91,000 families who lost their homes last month, or 605,000 people who lost their jobs since January, 605,000 good-paying American jobs and counting since January.
Now we hear the solution is to create a commission or to study the problem. That is what we need, to study the problem. We know what the problem is. The problem is, we need to get people back to work. We need to stop this failed Republican philosophy that has made the rich richer, while picking the pockets of every middle-class American and making those in poverty find more and more desperation every day. We know what is happening. We don't need an economic study to tell us that Phil Gramm, a former colleague of mine, chairman of the Banking Committee, was wrong when he said it is a mental recession. We are not making this up. We certainly are not a nation of whiners.
So the question is, how did we get here? Unfortunately, this does relate to failed policies. One example was under the Republican Congress when Senator McCain's former economic adviser and friend, Senator Phil Gramm, slipped a provision called the Enron loophole into an 11,000-page appropriations bill on a Friday night before a recess. That provision allowed financial institutions to trade an unlimited amount of energy commodities in the dark in over-the-counter markets that are beyond the jurisdiction of the Commodity Futures Trading Commission. Only now, with our Democratic majority, have we begun to get accountability back because we have closed that Enron loophole.
However, trading on the bilateral swaps markets, the complicated financial markets, the electronic trading facilities are still being conducted in the dark with no transparency, no regulation, no accountability for investors, no accountability for the American people. The Commodity Futures Trading Commission only has the power to get information on these markets on an ad hoc basis. So speculative investors continue to pour money into markets without any oversight.
Yet Republicans continue to oppose more authority and resources to the CFTC. We have a bill on the Senate floor right now, a speculation bill to stop speculation, that includes providing more authority and resources to the CFTC, and it has been filibustered by Republican colleagues.
This just reiterates the failed philosophy of this President, President Bush, of John McCain, and Republican economics that believes in less oversight, less accountability, and more greed at the expense of the American people.
Mr. President, we have had enough. Nowhere is it seen more clearly than in the housing market, which is the root of the crisis. The lack of regulation and accountability by the Bush administration has allowed predatory lending to flourish. It is important to note that clear back to 1994, Congress gave the Federal Reserve the authority to prohibit these unfair, deceptive lending practices, and they waited 14 years to implement this authority--14 years.
Mr. President, I know my time has come to a close, so I will not go through all of the other things that have happened--the times the Democrats have proposed legislation, the warnings we have given, the fact we have tried over and over and over again to pass housing legislation.
I was here on the floor of the Senate when a Republican colleague talked about the fact that we finally passed housing legislation. But do you know what? We took way too long. The bottom line is this: We have been trying time and time again to enact changes, to bring accountability on behalf of the American people, and we have been blocked over and over again. It is important the American people understand we can do better than these failed Republican policies. It is time for a change.
Thank you, Mr. President.
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